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ECONOMICS AND ETHICS 
Heatl) foetal delations* Series 


HEATH SOCIAL RELATIONS SERIES 

JEROME DAVIS, Yale University 
General Editor 


* INTRODUCTION TO SOCIOLOGY. By Jerome Davis of Yale 
University and HARRy E. Barnes of Smith College (with L. L. 
Bernard of the University of North Carolina, Seba Eldridge of 
the University of Kansas, Frank H. Hankins of Smith College, 
Ellsworth Huntington of Yale University, and Malcolm Wil¬ 
ley of University of Minnesota). 

♦READINGS IN SOCIOLOGY. Selected by the Authors of Introduc¬ 
tion to Sociology to supplement that volume. 

♦IMMIGRATION AND RACE ATTITUDES. By Emory S. Bogar- 
dus, Chairman of the Department of Sociology and Director of the 
School of Social Welfare, University of Southern California. 

♦INTRODUCTION TO SOCIAL PSYCHOLOGY. ByRADHAKAMAL 
Mukerjee, Head of the Department of Economics and Sociology, 
Lucknow University, and Narendra Nath Sen Gupta, Head of the 
Department of Experimental Psychology, Calcutta University. 

♦ECONOMICS AND ETHICS. By John A. Hobson, Lecturer on 
Economics, Oxford University. 

INDUSTRIAL RELATIONS. By Robert W. Bruere, Associate 
Editor of the Survey. In preparation. 

CRIMINOLOGY. By R. H. Gault, Editor of the Journal of Crimi¬ 
nal Law and Criminology. In preparation. 

COMMUNITY ORGANIZATION. By E. C. Lindeman, Chairman 
of the Department of Sociology of the New York School of Social 
Work and Lecturer for the New York School of Social Research. 
In preparation. 

MENTAL HYGIENE. By Frankwood E. Williams, Medical Di¬ 
rector of the National Committee for Mental Hygiene. In prep¬ 
aration. 

RELIGION AND SOCIAL CONTROL. By John M. Mecklen, 
Chairman of the Department of Sociology, Dartmouth College. In 
preparation. 

CONCEPTS OF SOCIOLOGY. By Earle Edward Eubank, Head 
of the Department of Sociology, University of Cincinnati. In prep¬ 
aration. 

INTRODUCTION TO THE STUDY OF ^SOCIAL STATISTICS. 

By Robert Morse Woodbury of the Institute of Economics. In 
preparation. 

REVOLUTION AND SOCIAL CHANGE. By Herbert A. Miller, 
Professor of Sociology, Ohio State University. In preparation. 

HISTORY OF SOCIAL THOUGHT. By Harry Elmer Barnes, 
Smith College. In preparation. 

* Published 





Economics And Ethics 

A Study in Social Values 




BY 


Jt' ,v A. HOBSON 


/ 


/ 


With a foreword by 

JEROME DAVIS 

Yale University 



D. C. HEATH AND COMPANY 

BOSTON NEW YORK CHICAGO 

ATLANTA SAN FRANCISCO DALLAS 

LONDON 




H 6'/2 

,H 


( (1 ( 


/ 


Copyright, 1929, 

By D. C. Heath and Company 


2 f 9 


PRINTED IN TJ.S.A. 


©Cl 


A 10223 O.f 


JIM " 1 

JUL 15 V?9 






FOREWORD 


Economics and Ethics are closely interrelated. To the 
extent that we attempt to apply economic principles to our 
social order, we cannot leave out of account the moral ef¬ 
fects produced. Similarly, when we attempt to approach 
the “highest good”, and “right and wrong” conduct in society, 
we encounter economic standards and “economic law.” 
Every individual is an economic man. He does not live his 
life in a vacuum, but in the midst of a complex economic 
structure which affects his thinking and conduct at almost 
every point. Because this is true there has been a growing 
conviction among both economists and sociologists that we 
need a text-book which introduces the student to the subject 
of economics from the standpoint of ethical values. An 
American committee, discussing who would be the best au¬ 
thor of such a work, unanimously recommended J. A. Hobson 
of England. Mr. Hobson, as is well known, has been a 
lecturer in economics for Oxford University Extension and 
the London Society for the Extension of University Teach¬ 
ing. Ever since his first volumes appeared, The Psysiology 
of Industry (1889) and The Evolution of Modern Capitalism, 
(1894), he has been recognized as one of the foremost econ¬ 
omists in the English-speaking world. 

For several years Mr. Hobson has been working on the 
present volume. It is a pioneer work. There are no Ameri¬ 
can text-books available on the subject. To be sure there 
is a brief pamphlet by C. E. Ayres on The Nature of the 
Relationship between Ethics and Economics , and in Eng¬ 
land J. A. R. Marriott has written a volume on Economics 
and Ethics , which is in part a popular defense of existing 
economic practices and conventional standards,while H. F. 
Ward has recently written a volume bearing the title Our 
Economic Morality and the Ethic of Jesus. Aside from 
these studies, this is a virgin field. 

‘•<1 


ii 


FOREWORD 


In this day and age following a World War costing over 
twenty-five million dead and ever recurring industrial con¬ 
flicts, the student of economics is beginning to ask for light 
on such ethical problems as: 

What do we mean by social welfare? To what extent 
should ethical considerations enter into the organisation of 
industry or the distributive mechanism? 

Do the problems of production, wages, profit, and interest 
fall within the scope of ethical treatment, or are they gov¬ 
erned by immutable economic law? 

What are the ethics of property? How can we secure in¬ 
creasing harmony in our economic life? How can we avoid 
the major conflict of our time? 

What are the ethics of bargaining? Are there “unearned” 
gains? What are they? What should be done with them? 

How far can the present system be safely reformed as to 
its incentives, its supply of capital, its consumption, and its 
standard of exchange? 

These are among the questions which the mature student 
of economics will insist should be discussed. No adequate 
presentation of the subject today will want to leave them out. 
Yet this volume, almost alone, seriously attempts their 
answer. It could well be used as a text-book in advanced 
classes, both in ethics and economics, and as collateral read¬ 
ing in elementary courses. 

This treatment should also make its appeal to the thought¬ 
ful citizen who wishes to make his daily conduct pattern 
square with his ideal standard. Until some other writer 
pushes the inquiry farther into the ethical aspects of eco¬ 
nomics, this volume must inevitably be considered the stand¬ 
ard work on the subject. 

Jerome Davis 


Yale University 


PREFACE 


The endeavour in this book to trace and to express the 
relations between economic and human values, wealth and 
life, follows several lines of enquiry. One is concerned with 
studying the part which processes of production and con¬ 
sumption play in the determination of human welfare. An¬ 
other deals with the changing attitudes adopted by economic 
science towards the demand that it shall take account of 
ethical considerations in its structure and method. A third 
treats the distinctively social aspect of the problem, the 
tendency of organised society to exercise a control of eco¬ 
nomic processes in the interests of equity, humanity, and 
social order. 

The threads of these enquiries sometimes run separately, 
sometimes they are intertwined. In order to minimise con¬ 
fusion, I have made certain rather arbitrary divisions. Part 
I is chiefly given to an attempt to wrest from social philos¬ 
ophy an intelligible and consistent meaning for human value 
and welfare. Part II sketches the emergence of an economic 
science and its formal relations to ethics. Part III discusses 
the ethical significance of certain basic factors in the modern 
economic system, especially property and the processes of a 
market. Part IV deals with the crucial issues of industrial 
peace and progress in the light of modern humanism, with 
especial regard to the new problems emerging in a world 
becoming conscious of its widening unity. 

The brief Bibliography given in the Appendix is, of course, 
wholly inadequate as an indication of the vast literature upon 
which readers might draw in profitable pursuit of the topics 
discussed here. I thought it well, however, to give prom¬ 
inence to a few works which I have found particularly ser¬ 
viceable in preparing the several chapters. 

iii 


IV 


PREFACE 


In conclusion, I desire to express my deep sense of obli¬ 
gation to my friends Maurice Adams, C. Delisle Burns, and 
R. H. Tawney, who were so kind as to read this work in 
manuscript and to offer me much serviceable advice in bring¬ 
ing it to completion. 

J. A. Hobson 

London 

February 1929. 


CONTENTS 


PAGE 

Editor’s Foreword .i 

Preface .iii 

Introductory .vii 

PART I —STANDARDS OF WELFARE 

CHAPTER 

I The Humanist Approach to Economic Life . . 3 

II The Meaning of Welfare.10 

III Welfare Through Community.23 

IV Standards of Welfare.45 

V The Hierarchy of Values.70 

PART II —ETHICS IN THE EVOLUTION OF 
ECONOMIC SCIENCE 

I The Place of Industry in the Life Process . 77 

II The Emergence of Economics as a Science . . 86 

III Economic and Ethical Values.112 

PART III —THE ETHICS OF ECONOMIC LIFE 

I Ethics of Property.141 

II Harmony and Discord in Economic Life . . . 167 

III The Ethics of Bargaining.201 

PART IV —ORGANIC REFORMS OF THE 
ECONOMIC SYSTEM 

I The Principle of Equitable Distribution . . 217 

II How Far is Equity Attainable?.242 

III Incentives to Labour.255 

IV The Supply of Capital.274 


v 











VI 


CONTENTS 


CHAPTER PAGE 

V Standards of Consumption. 301 

VI An Optimum Population. 340 

VII The State and Industry. 372 

VIII Ethics of Economic Internationalism . . . 390 

IX Uses and Abuses of Money. 407 

X A Human Survey. 431 

Appendix (Bibliography, Questions, and Subjects for Study) 459 
Index. 479 







INTRODUCTORY 


To perform with scientific precision the task of translat¬ 
ing economic values into ethical or human values is mani¬ 
festly impossible. For economic values in their first intent 
are quantities of money, while ethical or human values are 
qualities of life. Yet money and the economic operations 
for which money stands, and which money controls, play so 
important a part in human life as to compel students of hu¬ 
manity to attempt some orderly adjustment between the two 
sorts of value, some appreciation of economic valuations in 
terms of the humanly desirable. In any such attempt it is 
well at the outset to realise the nature of the difficulties to be 
overcome, and the limits within which we must work in any 
humanist evaluation of economic processes. To pass from 
monetary to vital values involves several distinguishable 
movements. Money values must first be translated into 
the concrete saleable things, the goods and services, which 
prices, or any sort of payment or income, express. These 
goods must then be resolved into their net costs of production 
and their net utilities of consumption. By costs we signify, 
of course, not money costs, for that would be retracing our 
steps, but the wear and tear and disagreeable exertions in¬ 
curred in the productive processes. Some of this costly wear 
and tear is that of human beings, some falls directly upon 
nature and non-human instruments. But, since the task of 
replacing the non-human wear and tear falls mainly upon 
man, we may speak of ‘costs’ as human costs. I use the term 
‘net’ costs, because in many human productive processes 
there are elements of enjoyment, or utility, as well as of cost, 


INTRODUCTORY 


viii 

which should be taken into due account. So likewise with 
the ‘utility’ or enjoyment of consumption, there is often a 
debit account from the pains or injuries of ‘illth’, misuse, and 
excess. 

This expression of economic values in ‘subjective’ costs 
and utilities does not, however, carry them on to the plane 
of ethical or human evaluation. For these costs or utilities 
register actual gains or losses as they operate in the economic 
system on a valuation based on current desires and estimates, 
which may not be reliable indices of the desirable. Thus 
some further adjustment is needed to assess the desired in 
terms of the desirable. Nor is the process yet complete. 
Even when we have got so far as thus to resolve monetary 
wealth into its equivalent in human value, we have not fin¬ 
ished our task. For in following our economic path we 
have ignored the interactions that everywhere and always 
take place between economic and non-economic functions 
and activities in the human organism. 

Ultimately the goods which are the concrete expression of 
money values must be evaluated by the total effects which 
by the terms of their production and consumption they exert 
upon human personalities and communities regarded as or¬ 
ganic wholes. 

All these steps are necessary to pass from economic wealth, 
as rendered by money, to human welfare — the ethical test 
and goal. And all these early steps, as we shall see, are 
slippery. Magnificent plungers like Ruskin may impose 
arbitrary meanings upon ‘wealth’ and ‘illth’ and bring whole 
civilisations to a grand assize. But those who rely upon 
calmer reasoning will have to test each step and make good 
the footing. It may, indeed, turn out that some of our diffi¬ 
culties are in a strict sense insuperable. One or more of 
these steps may be impassable. The strictly subjective ele¬ 
ment in personality may baffle all computation of concrete 
wealth in human welfare. The relations between economic 


INTRODUCTORY 


IX 


and non-economic factors of welfare may evade observation 
and record. 

To certain of these difficulties inherent in the material of 
our enquiry I will return a little later. But some character¬ 
istics of such an enquiry are attributable to the mentality of 
the enquirer and his approach towards his subject-matter. 
A disinterested attitude of mind and a ‘dry light’ are often 
claimed as indispensable conditions for scientific study. 
Now a good deal of misunderstanding will be avoided if, at 
the outset, we recognise the limits to the attainability of 
these conditions in such an enquiry as we are here entering. 
Even the most rigorous of behaviourists finds it difficult to 
observe and plot out human actions in a perfectly dry light 
of objectivity. No individual or social psychologist can 
hope to handle the psyche for his subject-matter, without im¬ 
porting into his handling some of the prepossessions or emo¬ 
tional valuations which have entered his personal experience 
and helped to mould a mind which is not a merely reasoning 
apparatus but is suffused with feeling. There are, no doubt, 
large fields in history or sociology where the ordering and in¬ 
terpretation of facts may be conducted with a high measure 
of strict objectivity. But when we are concerned with the 
ethical evaluation of any sphere of current conduct, whether 
in the field of private morals, in art or literature, in business 
or in politics, strict disinterestedness becomes impossible, 
and its claim a foolish pretence. In particular the field for 
our investigation here is thickly sown with emotional dis¬ 
turbers, reflecting the particular interests, leanings, valua¬ 
tions, and attachments that have come, for the most part un¬ 
consciously, to mould the valuations with which the investi¬ 
gator must approach his task. At first sight this may seem 
a counsel of despair. If every observer sees his subject in 
the light of his unique private interests and prepossessions, 
we may get as many different social philosophies as there 
are members of society. But the fallacy of this judgment is 


X 


INTRODUCTORY 


obvious. It ignores the uniformity of human nature, the 
solid fact that all men, in their constitution of body and mind, 
and in their natural and spiritual heritage and environment, 
are much more alike than unlike, though the unlike element 
is so much more interesting as sometimes to obscure the like. 
So the subjective character of our investigation will be in the 
main the common character and not the particular bias of a 
personal character and expression. This is the valid as¬ 
sumption for the possibility of any social science. But it 
would be idle to ignore the fact that, in the observation and 
interpretation of the modern life of man in any interesting 
field, it is essential to make due allowance for the milieu in 
which the mentality of the observer and interpreter has been 
formed and by which it must be sensibly affected. For only 
in this way can allowances and discounts be applied, so as to 
enable ‘disinterested’ students to get the greatest common 
measure of objective truth from the sources of their study. 
Though, naturally, no man can clearly appreciate his own 
personal biases of opinion or interest, he can sometimes, by 
memory and reflection, recognise the moulding influences to 
which his mind has been subjected, and realise the ways in 
which they must have influenced his approaches to the prob¬ 
lems of his time. 

These general reflections have, I think, a special bearing 
upon the task here undertaken. For the period roughly de¬ 
scribed as the Eighties, in the last century, was of particular 
significance in moulding the thinking of those who now form 
the older generation of sociologists and economists in Great 
Britain. Many movements and events conspired about that 
time to break up the complacency of the mid-Victorian era 
of peace and prosperity. The collapse of English agriculture 
had begun, and the flocking of populations into town life was 
helping to force into prominence the ‘slum’ problem. Though 
real wages were still rising for the great majority of regular 
workers, the plight of the unskilled and casual labourers was 


INTRODUCTORY 


xi 


beginning to get upon the nerves of the nation. Up to the 
Eighties, the fiercer indictments of the capitalist and machine 
system of industry, whether from the pen of litterateurs and 
preachers, such as Dickens, Carlyle, Ruskin, Kingsley, and 
F. D. Maurice, or as echoes of continental socialism, had no 
strong influence upon the mind, either of the educated classes, 
or of the newly organised workers. An authoritative science 
of Political Economy was believed to have established a body 
of laws which governed industrial life, producing and dis¬ 
tributing wealth by necessary processes which could not be 
disturbed without disaster, and which were not amenable to 
ethical criticism. The friction in their working, the indi¬ 
vidual poverty and misery, gave opportunity for duly or¬ 
ganised charity. Though the penetrating eloquence of 
“Unto this Last” and “Munera Pulveris” was making its 
influence upon many sensitive minds, the ‘common sense’ of 
our successful classes rejected all such ethical and emotional 
appeals as purely ‘sentimental’. The educated workers and 
their leaders were too much absorbed in bettering their local 
trade conditions by collective bargaining to pay serious heed 
to socialistic theories or revolutionary policies. 

Though we were conscious that the poor were always with 
us, the recognition of poverty as a social disease, demanding 
social treatment and capable of remedy, came upon the 
wider mind of England as a discovery of the Eighties. The 
revelation of poverty in our metropolis then first forced it¬ 
self upon the imagination and sympathy of the well-to-do. 
The social work of the newly formed Salvation Army, the 
“Bitter cry of outcast London”, the foundation of Toynbee 
Hall, the first Social Settlement, followed closely by the great 
survey of London, organised by Charles Booth under the 
title, ‘Labour and Life of the People’, marked the stirrings 
of this new spirit of compunction and social responsibility. 
Slum investigation and schemes for what was called in hu¬ 
morous pomposity, ‘the amelioration of the condition of the 


INTRODUCTORY 


xii 

working classes’, became the order of the day among ‘public- 
spirited citizens’. In 1885 an Industrial Reconciliation Con¬ 
ference, with Sir Charles Dilke as President, two Cabinet 
Ministers as Vice-Presidents, and an attendance of men emi¬ 
nent in economics and business life, with delegates from trade 
unions, cooperative societies, and other working-class or¬ 
ganisations, met to discuss an issue, thus stated by the leader 
of English positivists, Mr. Frederic Harrison, himself an 
ardent reformer. 

“What are the best means, consistent with equity and 
justice, for bringing about a more equal division of the ac¬ 
cumulated wealth of this country, and a more equal divi¬ 
sion of the daily products of industry between Capital and 
Labour, so that it may become possible for all to enjoy a fair 
share of material comfort and intellectual culture, possible 
for all to live a dignified life, and less difficult for all to lead 
a good life?” Among the speakers at this conference the 
names of Mr. Arthur Balfour, Sir Thomas Brassey, Pro¬ 
fessor A. Marshall, Dr. A. R. Wallace, Professor F. W. New¬ 
man, Mr. Benjamin Jones, and Mr. John Burns stand as 
representing a wide variety of outlooks. The last of these 
gentlemen appeared as delegate of an organisation with the 
new and significant title, ‘Social Democratic Federation’, at 
that time the most energetic of several groups of avowed 
‘socialists’, the products of the early Eighties, who arose to 
press their gospels upon the opening minds of sensitive in¬ 
tellectuals and class-conscious workers. Of the several dis¬ 
tinguishable schools of English socialists, this S.D.F., with 
Hyndman, Burns, and Champion for their spokesmen, de¬ 
rived directly from the continental fount of Marxism, though 
Marx, be it remembered, lived in England and based his work 
upon studies of English capitalism. The shortlived ‘Social¬ 
istic League’, with William Morris for prophet, Belford Bax 
for philosopher, appropriately represented the anarchistic 
strain which closer study of state-socialism always evokes. 


INTRODUCTORY 


xiii 

Christian Socialism once more raised its head under the Guild 
of St. Matthew, while last, not least, the year 1884 marked 
the birth of the ‘Fabian Society’, followed a little later by the 
publication of ‘Fabian Essays in Socialism’, to which George 
Bernard Shaw, Sidney Webb, Graham Wallas, Sydney Oliv¬ 
ier, and Annie Besant were leading contributors. Henry 
George’s ‘Progress and Poverty’, published in England first in 
1881, supplemented the attacks on capitalism by an attack on 
landlordism which became an economics, a politics, an ethics, 
and a religion for many simple-minded enthusiasts, especially 
in our large cities, with their swelling ground-rents and 
abounding slums. The great strike in the London docks in 
1889 dramatised the situation of the underworld of East 
London and the demands of ‘unskilled’ labour. 

As yet the attitude of these schools of social reform and 
criticism towards government and Parliament was vague and 
hesitant. The notion of capturing the political machine, 
though present to Fabian tactics, had as yet scarcely pre¬ 
sented itself as practicable to trade unionists or revolution¬ 
ary socialists. The Scottish Labour Party, however, took 
shape in 1888, followed five years later by the foundation of 
an ‘Independent Labour Party’ in England, avowedly so¬ 
cialistic in its economic policy. 

The spirit of moral revolt, the appeal to justice and hu¬ 
manity, which took such various forms in the activities of 
this era, was by no means without its influence upon the 
academic economics of the time. The breakaway of Jevons 
from the cost theory of value, in favour of an analysis of 
demand which made the utility or satisfaction of the con¬ 
sumer the standard and determinant of economic values, was 
a marked advance towards the humanisation of economic 
science. But though Jevons’s claim “to treat Economy as a 
Calculus of Pleasure and Pain” (imperfectly applied in the 
actual development of his theory), digs below the harder 
concrete wealth of the classical economists, its too separatist 


xiv 


INTRODUCTORY 


treatment of human motives and desires, and its failure to 
give an equal recognition to ‘costs’ in his utilitarian calculus, 
were serious limitations in his work, regarded from the stand¬ 
point of ethics. More significant was the claim of Marshall, 
the great Cambridge economist of this period, in the preface 
to his Principles of Economics 1 which was to be the leading 
text-book of English economic teaching for a generation, that 
“ethical forces are among those of which the economist has 
to take account.” 2 And throughout his work and those of 
most of his associates and followers, there is found a recog¬ 
nition, sometimes even a parade, of ethical considerations. 
They enter in two ways. First, as motives in modification 
of the crude greed and selfishness imputed to ‘the economic 
man’. Altruistic motives, so far as they are operative in 
economic conduct, must evidently be taken into due ac¬ 
count, as economic factors. But another ethical considera¬ 
tion is a wavering recognition that the operations of the 
economic system, as expounded by its science, do not con¬ 
form adequately to the dictates of reason, justice, and hu¬ 
manity in the apportionment of labour and the fruits of 
labour. I speak of it as ‘wavering’, in that such recognition 
of unfairness appears to have been held consistent with the 
view that the laws of economic distribution are inevitable in 
their working, and are in their normal operation sound as 
tending to reward every producer according to ‘his worth’. 
In other words, what condemnations of the hardships and in¬ 
justices of current industrialism appear in the authoritative 
economics of this period were not incorporated in the struc¬ 
ture of the economic theory, but were of the nature of obiter 
dicta or qualifying reflections. 

This brief account of the ferment of the Eighties in action, 
thought, and sentiment, may help to explain the temper and 
attitude of mind with which a young thinker of that time, 
unconscious of any parti pris or closer class or intellectual 
1 First published 1891. 2 Principles, p. x. 


INTRODUCTORY 


xv 


bias, might naturally approach the economic institutions of 
his time as a subject-matter for understanding and for human 
valuation. With such independence of judgment as he 
could command, and applying such powers of criticism as 
the study of economic processes evoked, he might reasonably 
be expected to make two approaches to a fresh criticism of 
the social-economic system. These approaches may be thus 
expressed as propositions of distinctively ethical import. 
The first is that the payment made to any contributor to the 
productive processes, either as a worker with hand or brain, 
or as owner of any other factor of production, is not deter- 
•mined to any appreciable extent by the nature of the particu¬ 
lar contribution he himself makes, but by an operation of the 
market in which the contributions of innumerable other per¬ 
sons and processes are taken into account. This may be 
called the doctrine of the social determination of values. 
Put simply, it signifies that what anybody gets for what he 
does depends to a very small degree upon his own effort, skill, 
or other personal merit, and almost wholly upon the actions 
of other people who either make what he is making, or make 
other things wherewith to buy what he is making. Though 
economists had long ago recognised this interplay of supply 
and demand in fixing prices, they had failed adequately to 
realise its moral implication, continuing to treat the indi¬ 
vidual producer as if he held his economic fate chiefly in his 
own hands. 

A second proposition follows from the social determination 
of value and of price, viz., that the distribution of wealth and 
income thus brought about is inequitable and economically 
wasteful. This truth emerges from any close examination of 
the various processes of bargaining between buyers and 
sellers. The unfairness and the waste do not represent ‘fric¬ 
tion’ or any minor defect in an operation that is normally or 
generally sound, but are rooted in the nature of the bargain¬ 
ing process which apportions the gain of the bargain, not ac- 


XVI 


INTRODUCTORY 


cording to the merits or needs of the parties, but according to 
the economic strength of their position. Since the actual 
distribution of the product of industry was implemented by 
contracts, sales, or other acts of bargaining, the unfairness 
and the waste emerging in the several processes of bargaining 
passed into the general process of distribution. On enquir¬ 
ing into the conditions of buyers and sellers in the various 
markets, not only for the sale of goods but of services, the 
sale of labour-power in all its grades and kinds, but also the 
sale of the productive power of capital and the natural re¬ 
sources of the soil, startling examples of the normal inequal¬ 
ity of bargaining came to light. 

The question one put to oneself at this stage of the enquiry 
was, ‘How can it have come about that to ordinary business 
men, and to economists, this normal and general defect of the 
distributive process escaped recognition?’ The answer, it 
seemed, was to be found partly in the selective and defective 
nature of the charges brought against the operation of the 
economic system by hostile critics, partly in overrating the 
policy of competition. The socialist analysis, which concen¬ 
trated upon the power of the employer to purchase labour on 
terms enabling him to appropriate ‘the surplus value’, as the 
sole source of economic injustice, without discriminating be¬ 
tween interest and profit, without allowing for any collective 
resistance on the part of labour, and without allowing for the 
effect of competition among employers in reducing prices and 
handing over to ‘consumers’ their initial advantage in buying 
labour cheap, rightly failed to carry conviction to those fa¬ 
miliar with the actual operations of the business world. 
Wholesale assaults upon profiteering in industry could not 
command assent among those who knew how narrow was the 
normal margin of profit in most businesses, and how many 
were the failures. Still less convincing was the attack upon 
the private ownership of land, with its power to rack-rent the 
entire industrial community as the forts et origo malorum. 


INTRODUCTORY 


XVII 


It was easy for Mr. F. A. Walker and other economists to 
prove, by naive reliance on the logic of competition, that 
capitalists, employers, and in some instances even land- 
owners, could not hold the gains they seemed to make in bar¬ 
gaining with wage-earners or tenants, but must hand them 
over to the residuary legatee, the consumer. 

Now the notion that the gains of industrial progress do and 
must by an inevitable process, in spite of friction, and the 
exaction of monopolists and landlords, pass to the consumer, 
is still the prevailing creed of the business man, so far as he 
entertains any central economic creed, and the economists 
still give it their general adhesion. But not until we realise 
that the consumer, as such, has no claim to figure at all in the 
problem of distribution of income, can we clear our minds for 
a right statement of the issue. Income is divided among the 
producers of wealth, i.e. among those who, by their personal 
efforts, or the services of the natural resources or the capital 
goods they own, contribute towards its production, and the 
problem of distribution is exclusively confined to the terms 
of apportionment of the income between the various con¬ 
tributors. Whether the recipients, workers, capitalists, em¬ 
ployers, landlords, etc., consume, or save, or waste, the goods 
which thus pass into their possession, is a different problem, 
and should not be confused with that of the distribution of 
wealth or income. For, until this irrelevancy is cleared 
away, our mind is not free to concentrate upon the nature 
and conditions of the bargaining process as distinct from the 
particular cases of that process. Only by recognising that 
economic force, whether rooted in natural or contrived scarc¬ 
ity, in fortuitous circumstances, or in power of ‘holding out’, 
is normally operative in all markets for the sale of goods or 
services, as a determinant of the distribution of the gains of 
buying and selling, can we approach an ethical estimate of 
the working of the economic system. For only thus can we 
get into our minds the clear distinction between those ele- 


INTRODUCTORY 


xviii 

ments of income which are distributed equitably, rationally, 
economically, and those which represent inequity, unreason, 
and waste. This vital distinction between the payments 
necessary for the maintenance and efficient functioning of the 
factors of production, and any surplus over and above these 
personal incomes, is seen to be essential for any reasonable 
policy of social-economic progress. The highly composite 
structure of this surplus, flowing, as it does, from so many 
different sources, while releasing it from the simpler diag¬ 
noses of profiteering or rack-renting, makes it difficult of sure 
detection or precise measurement in an economic system 
where exactitude and publicity of costing and accountancy 
still leave so much to be desired. The post-classical econo¬ 
mists in England, America, and elsewhere, were, of course, by 
no means blind to this distinction between costs and sur¬ 
pluses. Marshall, in particular, evolved a doctrine of quasi¬ 
rents to cover the gains from temporary scarcities of supply 
in markets. But, apart from the fact that there was in most 
instances no 'quasi* in these scarcities, which yielded rents 
as real as land, and often as lasting, there arose the defence 
that these temporary gains were necessarily stimuli in the 
utilization of productive resources, or in other words, that 
they performed a useful social service. 

By such reasoning the dawning ethical distinction between 
costs and surplus was blurred, and the distinction between 
the incomes which represented payments necessary to evoke 
and maintain personal efficiency in productive services and 
the social surplus needed to maintain and enrich the com¬ 
munity, was lost. But not wholly lost. Recent evolution 
of taxation in most modern states is based half-avowedly 
upon a recognition that there are funds of excessive or 'un¬ 
earned* gains, passing into individual incomes, which can be 
diverted into public revenue without injurious reactions 
upon personal efficiency and productive effort. Modern ex¬ 
periments in progressive taxation of incomes and in heavy 


INTRODUCTORY 


xix 


inheritance duties, though usually defended on general 
grounds of ‘ability to pay’, are based in the last resort upon 
the fact that large amounts of wealth normally pass into the 
possession of persons who do not require or use them as sup¬ 
ports for productive services. 

But the full ethical significance of this radical distinction 
between personal costs and social surplus has been very slow 
to win recognition, though it is the true starting point for 
any ethical advance in the interpretation of economic values. 

While, however, such an analysis of the processes of bar¬ 
gaining is a necessary revelation of the fundamental unfair¬ 
ness which underlies the apportionment of this world’s goods, 
it does not carry us very far towards the completion of our 
task of human valuation. The further steps indicated in our 
opening pages still remain to be traversed. The stress laid 
here, as elsewhere, upon the processes which distribute the 
goods and services that constitute the real income, insensibly 
subordinates the costs and utilities of production to those of 
consumption, whereas the organic structure of man and of so¬ 
ciety demands that both should count equally and in mutual 
interaction. This truth, obvious in a ‘Crusoe economy’, is 
apt to be lost sight of under a division of labour where the 
mind of each man is directed more to what he is to get than 
to what he is to give. Yet it is quite evident that a disinter¬ 
ested valuation of economic processes must, in estimating in¬ 
comes, devise some way of setting the net human costs of 
earning the income against the net human utilities of spend¬ 
ing it, and in doing so, must recognise that the ways in which 
it is earned and spent mutually interact and affect the or¬ 
ganic welfare of the man. 

The term ‘Organic welfare’ should, I think, readily win 
acceptance as the criterion of economic values even among 
those disposed to distinguish ethical from biological values. 
For, in the first place, most economic activities are definitely 
directed to the survival and development of the physical or- 


XX 


INTRODUCTORY 


ganism of man. In the second place, the adjective ‘or¬ 
ganic’ has a wider acceptance than the substantive ‘organ¬ 
ism’. For most of those who jib at a ‘social organism’ will 
admit that a society is ‘organic’, by virtue of its ‘organisa¬ 
tion’. What is essential is the recognition that the elements 
in human welfare are organic in their relationship. The 
failure of most economists to give proper recognition to this 
truth explains the curious aloofness of the place occupied by 
economics among the social sciences, as well as the mistrust 
which ordinary men and women feel for the policies and 
practical advice that issue from the authoritative economists. 
The utilitarianism is too crude, the logic too absolute. 

The organic treatment of economic values finds its field 
of operations in the arts of production and consumption. 
From the organic standpoint the subdivision of labour, by 
which each man in a society devotes the whole of his eco¬ 
nomic activity to some single process, appears to stand self- 
condemned. For man as an organism was manifestly 
evolved for and by the integrated use of all his organs in a 
large variety of activities conducive to personal and specific 
survival and growth. An exclusively economic analysis of 
production shows us “shredded man”. The heaviest human 
indictment of our current economic system rests upon this 
charge. That man is not utterly destroyed by this economic 
assault upon his human nature is due to certain resistances, 
alleviations, and compensations, that lie outside the strict 
sphere of economic production. Larger leisure with its op¬ 
portunities for gardening, carpentering, and other ‘relief 
works’, for the organic satisfactions of games and sport 
(pleasurable imitations or adaptations of primitive activi¬ 
ties no longer needed) and for the inclusion of other active 
operations upon what is deemed the spending or consuming 
side of life, are more or less effective offsets to the dehuman¬ 
ising effect of specialised production. So far as our valua¬ 
tion finds it convenient to retain the distinction between pro- 


INTRODUCTORY 


xxi 


duction and consumption, its human computation of produc¬ 
tion must evidently include many organic activities that lie 
outside the income-earning class and are in a sense self- 
chosen to satisfy thwarted or neglected organic needs. 

But if human welfare on its productive side thus requires 
the importation of strictly non-economic activities for its 
organic interpretation, so likewise with the art or activities 
of consumption. The organic view of consumption puts its 
emphasis upon standards or harmonies. The crude analysis 
of separate articles of diet, clothing, etc., with separate utili¬ 
ties that diminish with each added unit of supply, loses its 
significance, in view of the interaction of the diverse ingredi¬ 
ents of welfare involved in the organic composition. More¬ 
over, as on the productive, so on the consumptive side, dis¬ 
tinctively economic consumption is merged with, and af¬ 
fected by, other non-economic factors, the conception of a 
standard of living being replaced by that of a standard of 
life. Again, the interactions between the productive and 
consumptive activities will become more intricate in propor¬ 
tion as life is realised as a fine art. For a fine art differs 
from other activities in fusing the processes of production 
and consumption, effort and enjoyment. Thus a human or 
organic valuation of economic processes will be continually 
traversing the distinction of production and consumption, 
substituting more and more the distinction between the nega¬ 
tive value of human ‘costs’ and the positive value of human 
utilities or satisfactions. It will thus approach closer to a 
biological conception of human economy, without necessarily 
admitting the supremacy or sufficiency of the biological 
standpoint. For all serviceable organic activities consume 
tissue and expend energy, the biological costs of the services 
they render. Though this economy may not correspond in 
close quantitative fashion to a pleasure and pain economy or 
to any other conscious valuation, it must be taken as a 
groundwork for that conscious valuation. For most eco- 


XXII 


INTRODUCTORY 


nomic purposes we are well advised to prefer the organic test 
to any other test of welfare, bearing in mind that many or¬ 
ganic costs do not register themselves easily or adequately 
in terms of conscious pain or disutility, while organic gains 
also are not always interpretable in conscious enjoyment. 
Even, therefore, for those who insist that all human values 
must ultimately be expressed in terms of individual con¬ 
sciousness, it is better to accept the organic criterion as pro¬ 
visionally serviceable. For there is this supreme advantage 
in this acceptance that, so far as the organic welfare is 
adopted, it minimises, though it cannot eliminate, the per¬ 
sonal bias in the valuer. For the longer we can put off try¬ 
ing to value states of consciousness, confining ourselves to 
behaviour, so much the better. If, as I hold, it is impossible 
to rest on a purely behaviourist basis of interpretation, it is 
none the less good to proceed along that basis as far as it is 
practicable. This course enables us to enter and explore 
without final committal another of the great social problems 
that have a peculiar interest for economics, the structure and 
function of the community. For, postponing for the time 
being the heated question whether there exists a group-mind, 
and if so, in what sense, we may consider the community, not 
as a mere aggregate of individuals, but as an organic struc¬ 
ture with a life ‘of its own’ both on the producing and con¬ 
suming side, and a harmony of practical activities supple¬ 
mentary to the individual economic harmony. The relation 
between this communal and this individual economy will be 
one of our most fruitful fields of exploration, involving, as it 
does, the critical issue, how far community and its institu¬ 
tions exist for, and are to be valued exclusively by, their con¬ 
tributions to the human welfare of the individual, or how far 
they have a life strictly communal with costs and utilities not 
thus resolvable. From the economic standpoint the im¬ 
portance of this issue lies in the consideration how far dis¬ 
tinctively social activities are productive of wealth, either 


INTRODUCTORY 


xxiii 

indirectly in sustaining the economic order and heritage, or 
directly, in organised public services, and how far these pub¬ 
lic services can undertake to supply certain human needs 
which cannot safely or properly be entrusted to private 
profitable enterprise. 

In our provisional acceptance of an organic test or stand¬ 
ard of value there may, however, lurk some misunderstand¬ 
ings due to the too closely materialistic and biological asso¬ 
ciations of the term. For example, in estimating economic 
costs and utilities by their contribution to the organic wel¬ 
fare of individuals and communities, we are confronted by 
the question how far the actual economic conduct, with its 
accompanying desires and gratifications, can be taken as a 
safe index of the desirable or organic welfare in its true 
sense. In dealing with the life of ants and bees, we seem 
able to eliminate the fact or possibility of error by the com¬ 
pleteness of the organic integration that appears in all their 
actions. But when conscious choice and the beginnings of 
reason take direction of behaviour, as in the higher primates, 
the correspondence between the desired and the desirable is 
no longer accurately assured. Error is possible. It may, in¬ 
deed, be claimed that error is not really eliminated by the 
specific instincts of automata; that, on the contrary, this 
lack of adaptability to environmental changes exposes them 
to perils of extinction, with which the conscious central 
guidance of the brain enables the higher animals to cope. 
But this diffusion of error in the conduct of the higher ani¬ 
mals, man in particular, does not relieve us of our difficulty. 
On the contrary it increases it. For, whereas errors in the 
life of instinct are few and fatal, in the life of the reasonable 
animal, man, they are many and often not evident. Apply¬ 
ing this general truth to our special theme, the human valua¬ 
tion of economic processes, we cannot assume a full identity 
of the income of an individual or a community, expressed in 
terms of current satisfactions, with that income expressed in 


XXIV 


INTRODUCTORY 


terms of human welfare. Nor is the difference to be ac¬ 
counted for only by consideration of the distribution of the 
toil of production on the one hand, of the satisfaction of con¬ 
sumption on the other. The total process of consumption- 
production may contain large elements of human w T aste or 
error, in that the tastes, desires, and satisfactions which ac¬ 
tively stimulate this wealth-creation may not conform to the 
standard of the desirable. Here lies the supreme problem of 
humanity, at once ethical, intellectual, aesthetic, how to inte¬ 
grate the capacities of man, as a social animal, so as to en¬ 
able him to make the most of a life that consists in the pro¬ 
gressively complex control of an environment which, by the 
very expression of this control, is calling forth and educating 
new cooperations of inborn capacities. This actively chang¬ 
ing human nature, with its changing activities, cannot be re¬ 
garded as completely expressing in its actual desires and 
conduct the human welfare that may be accounted as the 
pattern to which it would conform, if it were more moral, 
more intellectual, more aesthetic than it is. Nor are we war¬ 
ranted in taking a static view of the desirable, or of the hier¬ 
archy of values that expresses it. Regarding evolution 
alike in its material and spiritual aspects as motived by di¬ 
rective urges that constitute a general purpose, and unable 
to accept T. H. Huxley’s divergence between biological and 
ethical process, I am bound to regard the actual normal con¬ 
duct and desires of man, whether he be considered as animal 
or as homo sapiens , to be in general conformity with the 
ethically or humanly desirable. His ‘sapience’ thus will be 
directed, partly, to correcting the errors due to his incom¬ 
pletely integrated ‘nature’, partly, to those changes in the 
standard of the humanly desirable welfare, due to a clearer 
vision of a wider, longer, and more complex life for man. 
There are those to whom this vision of a higher life signifies 
an evident subordination and depreciation of the simpler 
animal desires and the activities that gratify them, in favour 


INTRODUCTORY 


XXV 


of the cultivation of intellectual and spiritual goods, re¬ 
garded as ‘disinterested’ in the sense of being devoid of bio¬ 
logical utility. 

The hierarchy of values for which these votaries of the 
higher life contend will be defended on the not unreasonable 
ground that, whereas the body is with us all and always, and 
its claims cannot be shirked, the life of the mind in its higher 
levels is only known to the enlightened few. Groundlings 
and sensualists cannot be entrusted with a comparative esti¬ 
mate of values, of most of which they have had no experience. 
The aristocracy of culture are thus self-designated for the 
delicate task of translating what is roughly termed ‘human 
welfare’ into a changing hierarchy of values, in which things 
of the body and the mind take their appropriate places. 
But this is less convincing than appears at first sight. For 
how if the pride of the intellect and spirit, the excesses of the 
mental life, induce a disparagement of the normal sensual 
life, from the manual labours and the attendant physical en¬ 
joyments of which they are so largely removed? Common- 
sense has always distrusted, perhaps with instinctive wisdom, 
the withdrawn life of the ascetic and the scholar, partly, no 
doubt, because they do nothing he calls work, partly, be¬ 
cause their positive ways of life are to him mysterious and 
crazy, taking them out of all social sympathy. When it is 
added that many such lives in these days require a physical 
equipment that is economically costly, the charge of para¬ 
sitism is added to the general suspicion. Such mistrust can¬ 
not rightly be dismissed as mere ignorance and superstition. 
The common sense which it expresses may in this, as in other 
matters, have survival value. For the exclusive possessors 
of intellectual values must be accredited with a disposition 
to overrate them and to underrate the material and popular 
values in forming their conception of a desirable life. 

It is precisely this unsound division, between the with¬ 
drawn and over-cerebral life of the cultured few and the 


XXVI 


INTRODUCTORY 


materialised extrovert life of the labouring many, that makes 
the problem of social progress so baffling. For until the 
commonsense of the many has shed its crude suspicions and 
is in some measure intellectualised, while the dangers of ex¬ 
cessive introversion are better recognised by our intellectuals, 
there cannot be any well-accepted valuation of the humanly 
desirable life. Indeed, there lurks under the whole process 
of such valuation an initial problem, that of giving a value to 
life per se. This is far from being a mere academic ques¬ 
tion. It is the very essence of that Population Question 
which in its various forms of birth control, racial selection, 
immigration, everywhere presses for an answer. Apart from 
the divergent views of optimists and pessimists, and the 
changing estimation which all of us would register at differ¬ 
ent ages and states of health, there is the problem as it pre¬ 
sents itself to economists, of a scale of comparison between 
quantity and quality of life, imposed by a so-called Law of 
Diminishing Returns. Who shall say whether one Darwin 
or Mozart is worth as much as a hundred million happy 
Negroes? Who shall give their respective valuations in hu¬ 
man worth to Nordics and Mediterraneans, to the many dif¬ 
ferent types generalised as Indians or Chinese, when the 
question is one of immigration? Everywhere the alterna¬ 
tive is set between How many lives? and What sort of lives? 

With the new significance given to internationalism and 
world policies in our age this problem of vital valuation 
bulks even bigger. The security of civilisation demands, if 
not a solution, then some generally acknowledged method of 
adjustment. For force, the enemy of reason, is still en¬ 
trenched in an exclusive nationalism which rejects any wider 
standard of human values, each nation framing its own hier¬ 
archy with itself as supreme head and arbiter. The cos- 
mopolis, which economic mutuality of interests has been 
building with so much elaboration of commerce and finance 
and such intricacy of dependent processes, has shown itself 


INTRODUCTORY 


XXVll 


too international, in the sense that nations as political and 
racial organs have set themselves to regulate the economic 
intercourse of the world by methods and for purposes not 
dictated by considerations of the general welfare of the world 
community, but by short-range calculations of separate na¬ 
tional advantage. It is just here that the supreme peril of 
our age is found, an over-conscious nationalism inflamed 
with war-pride and passion, and turning in peace-time to 
rivalry in economic policies as expressions and instruments 
of national power. Economic internationalism, moulded by 
such national and imperial urges, inclines to new balances of 
power in which the welfare of weaker peoples is subjected to 
the selfish ends of the stronger, either by a continuance of 
imperialist rivalry for the control and exploitation of back¬ 
ward countries, or by some development of inter-imperialism 
designed to allay the class-struggle within the civilised na¬ 
tions by a new alignment of the economic forces in the world, 
based upon a federation of western peoples controlling the 
peoples and resources of the rest of the world. The recent 
experiments in international organisation of capitalist in¬ 
terests in important industries and sources of supply are 
making in this direction, and the economic organs of a League 
of Nations, constructed by and for the great Western Powers, 
may lend valuable aid to a project which will easily present 
itself as the most reasonable method of securing the develop¬ 
ment of world-resources for the benefit of all the peoples. 

There are, however, those who deny the feasibility of such 
a project, finding an inherent contradiction in the operation 
of this economic inter-imperialism. The contacts between 
the advanced and backward peoples, involved in this pro¬ 
jected exploitation of the latter, the organisation of their 
labour for efficient production, the unavoidable penetration 
of Western political ideas and movements, the general fruits 
of education, improved intercourse, the establishment of 
little master communities with all the equipment of Western 


INTRODUCTORY 


xxviii 

civilisation, the deliberate education of new native wants for 
the benefit of exporting manufacturers at home — these 
various influences are found to unsettle raw minds, produce 
unrest, suspicion of white rule, nationalist movements for 
political and economic self-government, the familiar troubles 
in India and China to-day . 1 

In such a brief survey it is impossible to do more than state 
in barest shape the distinctive ethical nature of this widest 
movement of our time. For behind the tangle of business 
and politics in which international relations are involved, 
lies the moral-intellectual issue which Mr. Zimmern sets out 
with so much insight and knowledge in his essay on “Learn¬ 
ing and Leadership ”, 2 viz., the possibility of “adjusting the 
available resources of good-will, expert knowledge and in¬ 
tellectual and moral leadership to the needs of the post-war 
world.” The main obstacles are quite apparent; they are 
the nationalism compact of pride and fear, and the intra¬ 
national group economic interests bent on utilising rival 
nationalisms for their private gain. The initiative commonly 
is taken by the latter, that is to say, active national and im¬ 
perial policies are usually made and directed by business men 
who know better what they want and how to get it than do 
politicians. If this view be correct, it signifies that “the 
race between civilisation and catastrophe” can only be won 
for the former by the assertion of moral and intellectual su¬ 
premacy in the business world. This high-sounding gen¬ 
erality signifies, however, a good deal more than ‘common 
service' and ‘common honesty'. It signifies on the intel¬ 
lectual side, a knowledgable understanding of the elaborate 
and ever changing play of facts and forces throughout the 
economic system, recorded by reliable methods and with full 
and quick publicity, and the best facilities for cooperation 

1 For an expansion of this thesis cf N. Pfeifer’s The White Man’s 
Dilemma. 

2 Oxford University Press, 1928. 


INTRODUCTORY 


XXIX 


in the search for improved technique and organisation and 
for the communication of such improvements, irrespective of 
political boundaries. On the moral side it signifies a soften¬ 
ing of heart, an extension of honesty into generosity, through 
a cultivated sympathetic understanding of the needs and 
rights of others, irrespective of the barriers which enclose the 
areas of our directly personal experience. 

Nationalists sometimes have contended that there can be 
no general will, or communal spirit, outside the limits of the 
country in which we live, move, and have our being. And for 
mere groundlings and materialists there is force in this con¬ 
tention. But it is the function of education, the cultivation 
of the intellectual life, to supplement our own directly per¬ 
sonal experiences by the experiences of others communicated 
by records and interpreted by imaginative sympathy. Fa¬ 
cility of travel and accessibility to diverse sources of foreign 
knowledge, and the creative achievements of many minds in 
distant times and places nourish a morale, a humanism far 
wider, more refined, and more intense, than was possible even 
for the best natured man in former times. But opportunity 
is not enough; the desire and will to use opportunity are essen¬ 
tial. This is where education comes in — to make the world 
so interesting, upon its human side, history so rich, the cur¬ 
rent interplay of human motives and activities throughout 
the world so intelligible and so appealing, that even national¬ 
ism shall get its finest flavour from the sense of its peculiar 
contribution to the wider life of humanity. 

Whether or how far such an education, directing human 
processes of valuation, may be possible, depends on the de¬ 
gree to which the subordination of the economic processes to 
other conditions of a desirable life can be effected. For 
those who rightly present the economic system as one in 
which individuals cooperate for their common good are apt 
to overstate the moral case. So far as The common good’ 
emerges, it is mostly resolved in consciousness into a number 


XXX 


INTRODUCTORY 


of individual goods. What each is after is his own good. 
Mitigated as this sense is by some realisation of community, 
it continues to be the chief obstacle to that wider, stronger 
sympathy necessary that civilisation on its modern plane 
may work. In almost all economic processes there are too 
many opportunities and temptations to greed, suspicion, 
fear, and other separatist feelings. While more equitable 
conditions for apportionment of work and wealth may help 
to replace this cruder egoism by some sense of cooperative 
purpose, the application of ethical standards of value to eco¬ 
nomic life will require a constant reduction in the part played 
by distinctively economic processes in the consciousness of 
man. This signifies, on the one hand, a standardisation, 
or reduction to low-conscious routine, of the ordinary proc¬ 
esses of production and consumption; on the other hand, 
an organisation of industry based as far as possible upon 
the principle ‘from each according to his powers, to each 
according to his capacity to use’, so economising the indus¬ 
trial resources of the community as to liberate more and 
more of the time, energy, and conscious interest of its mem¬ 
bers for occupations, both individual and social, that lie out¬ 
side the distinctively economic field. As for the finer pro¬ 
ductive arts which carry a surplus of pleasurable interest in 
their activities, while their organisation and the marketing 
of their products bring them strictly within the economic 
scope, the humanity of their appeal places them outside the 
venue of the sterner economic laws. The further the stand¬ 
ardisation and reduction of costs in the industries which 
supply the common needs, the larger will be the leisure and 
the opportunities for the conscious cultivation of the arts 
that contribute to personal values. 

This introductory survey exposes a field so vast and so 
richly varied in its contents that no limitations of treatment 
however severely imposed can enable us to render an intel¬ 
lectually satisfactory account. The writer can, indeed, 


INTRODUCTORY 


XXXI 


make no pretence to more than a superficial acquaintance 
with many of the subjects he is bound to recognise as coming 
within the proper scope of his enquiry. To many of the is¬ 
sues opened up scientific rigour is manifestly inapplicable. 
Indeed, it is doubtful how far the term scientific can be 
claimed for the central purpose of this treatise. There may 
be a science of monetary values, and therefore of economic 
processes so far as reducible to monetary values. But in 
human valuation we have no such quantitative standard of 
reference. It is not merely a question of divergent apprecia¬ 
tions, the quot homines tot sententiae. The subject-matter 
to be valued is economic activities and products, not as they 
are in themselves, but as they are when transmuted into the 
psycho-physical organic processes of individual men and 
communities of men. Now the study of this effect of eco¬ 
nomic processes upon human life, however closely pursued 
with instruments of measurement, can never yield what a 
science means by definite results. Properly speaking, the 
human valuation of economics means the incorporation of 
economic activities in life as an organic whole, pursued, so 
far as it is capable of conscious direction, in the spirit of a 
fine art, the largest and finest in that it contains all that is in¬ 
cluded under art. But as every art is fed by science, or or¬ 
dered knowledge, so this art of living draws sustenance from 
all the sciences. Hence one of the intentions of this work is 
to consider how far economic science is properly organised 
and directed to the understanding of economic processes from 
the standpoint of this human art, and how far these processes 
themselves are conducted so as to make their best contribu- 
tive to that art. This is a task of criticism in its right mean¬ 
ing of discriminative judgment. But such judgments would 
be barren did they not contain at least the germs of construc¬ 
tive policy for the better assimilation of economic conduct to 
the art of human welfare, so far as this art embodies, as it 
does, an agreement upon the basic essentials to a good life. 










PART I 


STANDARDS OF WELFARE 



CHAPTER I 

THE HUMANIST APPROACH TO ECONOMIC LIFE 

§ 1. The conception of an economic system bringing into 
orderly relations the activities of large populations, or even 
of humanity as a whole, is entirely modern. Though many 
special problems of an economic nature troubled the minds 
of thinkers from the early times of Egyptian, Babylonian, 
and Chinese civilisation, effective social contacts for any pur¬ 
pose were in general so narrowly localised, and economic so 
implicated with other motives and activities, as to render im¬ 
practicable any clear abstraction of industry or business from 
the complex of interests and activities that make up human 
life. When under ancient despotisms labour was sometimes 
organised upon a large scale for the construction of public 
buildings, temples, palaces, roads, fortresses, or for the pri¬ 
vate households of the great, the conditions of such services, 
as well as their technique and uses, rendered them intract¬ 
able to any distinctively economic analysis. As for the 
ordinary life of the people in any country, while most of their 
active energies were undoubtedly engaged in occupations 
readily recognisable as economic, in the sense that they were 
directed to secure the material requisites of life, they were so 
intricately interwoven with other interests and activities of 
the home and the family, so insusceptible of any measured 
valuation of cost or utility, as to preclude them from separate 
consideration in group behaviour. Not until barter became 
a regular and considerable practice, involving specialisation 
for a market, did the beginnings of an economic system arise. 
But so long as the cultivation of some patch of earth for a 

3 


4 HUMANIST APPROACH TO ECONOMICS 


livelihood remained the lot of the vast majority of the popu¬ 
lation of every country, the primitive communism of the 
family as a mainly self-contained system, satisfying most of 
its requirements by the voluntary or customary services of 
its members, gave a very limited importance to the market 
as a connective tissue of an economic organism. The rudi¬ 
mentary commerce of a society where nearly all the popula¬ 
tion grew virtually all their food, made nearly all their 
clothes, most of their housing, furniture, and tools within the 
circle of the family, renders all our modern economic con¬ 
cepts and laws inapplicable. Even when town life with its 
organised trades and markets put considerable sections of 
the population upon a closer basis of inter-dependence by di¬ 
vision of labour, while regular employment on monetary 
terms extended the area of economic order, the family, never 
a distinctively economic unit, retained within its commu¬ 
nistic circle many of the productive activities which later 
fell under the economic system, as we now know it. Not un¬ 
til, first in Great Britain, then in other Western countries, 
the transformation of means of transport and communica¬ 
tion under steam-power had expanded, quickened, and 
cheapened the movement of goods, persons, and information, 
while the new machinery, utilising the same power increased 
enormously the output of manufactured goods, did the mod¬ 
ern economic system take clear shape as a distinguishable ob¬ 
jective being, and as an intellectual image in the mind of 
man. No more impressive evidence of this modernity can 
be obtained than that presented in Adam Smith’s Wealth of 
Nations, where we confront a singularly powerful and wide- 
ranging mind in the act of assembling intellectually the 
hitherto detached pieces of economic observation and reflec¬ 
tion, and welding them into some unity that stood out as an 
economic system. Even then modern economists recognised 
how imperfectly those analyses, principles, laws, which figure 
in their theory as distinctively economic, had been able to 


HUMANIST APPROACH TO ECONOMICS 5 


separate themselves from the entanglements of custom, law, 
politics, and morals, which still hampered the play of the 
business activities of the age, limiting mobility of labor, 
growth of joint stock enterprise, and freedom of commerce. 

§ 2. Not until the nineteenth century was well advanced, 
was the widespread reticulation of rapid, regular, reliable 
markets for commerce and finance extended through the 
civilised world sufficiently to bring the majority of its popula¬ 
tion within the compass of a single regulative economic sys¬ 
tem. That is, before the Industrial Revolution, economic 
were not sufficiently differentiated from other interests and 
activities to form the subject matter for a separate science. 

The rapid transformation of material and social conditions 
both of work and life produced by the new machine and 
power economy, with its great increase in the productivity 
of labour, had two important influences upon the thought of 
the age. On the one hand, it gave substance and sustenance 
alike to the ardent rationalism of the Utilitarians who, under 
the leadership of Bentham and James Mill, sought to regi- 
mentalise all departments of private and public life by doc¬ 
trines of enlightened self-interest for the achievement of 
“the greatest happiness of the greatest number”, and to the 
more exuberant schemes and visions of Robert Owen and a 
considerable band of enthusiasts for socialism and “a new 
moral world.” The most distinctive fruit of this utilitarian¬ 
ism in the realm of thought was the rapid rise of an authori¬ 
tative science of Political Economy, which subjected the new 
industrial order to a rigorous analysis and professed to dis¬ 
cover a body of laws and principles regulating the production, 
distribution, and consumption of wealth, as natural, neces¬ 
sary, and immutable, in their operation, as the laws of chem¬ 
istry and physics. Although, as will appear from the fuller 
treatment of the rise of this Political Economy given in later 
chapters, these early economists commonly, and doubtless 
with sincerity, disclaimed the intention of furnishing a de- 


6 HUMANIST APPROACH TO ECONOMICS 


fence or approval of the system which they expounded, their 
ranking of economic laws with the laws of physical science, 
in an age which prided itself upon the belief in the progress, 
or even the perfectibility, of human institutions, did actually 
serve to give a moral support to the new industrialism, its 
commerce and finance. 

Thus it came about that the stream of criticism and de¬ 
nunciation, which poured forth during the nineteenth cen¬ 
tury, alike from the ranks of humanism and culture, and 
from the thinkers and agitators of the working classes, was 
directed equally against the wrongs and miseries of the new 
industrialism itself, and the science which seemed to be its 
intellectual champion. Although in more recent times 
economists have, as we shall see, been more careful to guard 
themselves against the imputation of favouring the proc¬ 
esses they describe, or approving the laws they discover, we 
shall show reason for holding it true that the authoritative 
economic science of our day continues in the main to give in¬ 
tellectual support to the dominant economic practices, and 
to the system in which they are incorporated. 

§3. If this be so, it follows that our task has a double 
aspect. On the one hand, it essays to study the relations of 
industry to life; on the other, the relations of Economics to 
Ethics, regarded as the science and art of human welfare. 
As we proceed, it will transpire that these are not really 
separate or separable issues. For in every inquiry into ac¬ 
tual operations of industry, commerce, and finance, we neces¬ 
sarily encounter the theories, hypotheses, and laws which 
economists have formulated, either from facts or figures, or 
from a 'priori reasoning. If, therefore, we seek to assess any 
order of economic activity in the light of a wider human 
valuation, we bring the operation of some economic law to 
the test of ethics. 

In the controversies of the nineteenth century waged 
around the new economic system the two issues were virtually 


HUMANIST APPROACH TO ECONOMICS 7 


fused. The diatribes of Carlyle, Ruskin, William Morris, 
Kingsley, Maurice, as in the next generation of Tolstoy and 
Edward Carpenter, were equally directed against the bar¬ 
barities of the capitalist machine and factory economy, and 
the intellectual ‘imposture’ which in the name of science fur¬ 
nished support to this economy. The intellectual assault 
upon Capitalism, led by Marx, Engels, Lassalle, and other 
‘socialist’ assailants, largely with weapons selected from the 
‘classical’ armoury, was equally directed against the system 
and the science, the latter being regarded as a creed expressly 
invented in order to safeguard and promote the interests of 
the ‘capitalists’. 

§ 4. Seeing that this controversy in its more modern and 
developed shape must largely occupy us in this work, it may 
be convenient here to set out, as simply as possible, the 
counts of the indictment which nineteenth century human¬ 
ists and socialists brought against the ‘capitalist system’ as 
they saw it. 

(1) The distribution of wealth, and of the opportunities of 
acquiring it, such as education, choice of work, access to land 
and capital, was unequal and unfair. Each nation was vis¬ 
ibly divided into two classes, rich and poor, toilers and idlers, 
masters and serfs. The bargains and contracts by which 
goods and services were bought and sold were loaded with in¬ 
equality. 

(2) Selfishness was not merely the dominant practice but 
the accepted principle for all economic conduct. Each was 
to devote his mind and body to the attainment of his per¬ 
sonal gain, in pursuit of which he was to get as much and 
give as little as possible. 

(3) Industrialism built upon an ever finer subdivision of 
labour meant the degradation of the man. “It is not the 
labour that is divided — but the man — divided into mere 
segments of man, broken into small fragments and crumbs 
of life.” “It is a sad account of a man to give of himself 


8 HUMANIST APPROACH TO ECONOMICS 

that he has spent his life in opening a valve and never made 
anything but the eighteenth part of a pin.” Free men were 
converted into servants of the machine. 

(4) Competition was condemned as a wasteful and irra¬ 
tional process. No clear conscious order existed outside the 
limit of the separate business. The relations of businesses 
competing in a single trade or market, the relations of dif¬ 
ferent trades in drawing on the general supply of capital and 
labour, were determined by blind fumblings, involving con¬ 
tinual errors of over and under production. Where ‘free’ 
competition was obstructed, as by tariffs or combinations, 
the impediments were equally irrational and wasteful. 

(5) Not only was man degraded in his work by the me¬ 
chanical division of labour. Factory towns, mean, ugly, and 
unhealthy, poisoning the air and the water with the fumes 
of their chimneys and the refuse of their mills, were destroy¬ 
ing the beauties of nature and removing the bulk of our 
people from wholesome contact with uncontaminated nature. 

§ 5. For the most part industrialists went their way in 
complete indifference to these criticisms from literary men, 
moralists, aesthetes, and philanthropists. They were ‘not in 
trade for their health’, ‘Business is not philanthropy’, ‘Busi¬ 
ness is business’. But defenders of Capitalist industrialism 
were not lacking. Though industry was best operated by in¬ 
telligent self-interest, it was none the less the servant of the 
community. Its increase of wealth was not held by a small 
greedy capitalist class, but enriched the whole community. 
The cooperative spirit was implicit in the whole process. 
Capitalist production brought a constant enlargement of ef¬ 
fective community, binding distant peoples in friendly ad¬ 
vantageous intercourse. It was a liberal education in in¬ 
dustry, responsibility, honesty, and thrift. Breaking up the 
remnants of feudal serfdom, it enlarged the liberty of man, 
gave him increased mobility and choice of work. The will¬ 
ing flow of labour into the factory towns proved that the 


HUMANIST APPROACH TO ECONOMICS 9 

mechanic and the mill hand were better off and freer than 
the farm-worker. Machinery even found its aesthetic ad¬ 
vocates. It was not base or ugly; as an expression of human 
skill and ingenuity, it was often beautiful and interesting in 
its appeal. Waste no doubt was found in the operations of 
the business system. But the new business organisation re¬ 
duced waste. Nature, and human work conducted in more 
‘natural’ conditions, were far more wasteful. 

These were the chief heads of a controversy so multiform 
and so entangled in its issues that no settlement has yet been 
reached. It has indeed shifted its character with the more 
recent developments of the technique and organisation of in¬ 
dustry. The size of the business unit is continually growing 
in the main branches of production and commerce: combina¬ 
tion is everywhere displacing or qualifying competition; em¬ 
ployers and employed are organised for negotiation or hos¬ 
tility: class-consciousness among the workers is accom¬ 
panied and mitigated by a new consideration of what is 
termed the Human Factor in Industry, and by sporadic at¬ 
tempts to harmonise the interests of capital and labour: the 
intervention of the State, or municipality, either as entre¬ 
preneur, or as controller of the conditions of industry, is in 
every country a potent factor in industrial life. But in its 
essential character modern capitalism is not changed. The 
government and conduct of business remains for the most 
part in the hands of the owners of accumulated wealth or 
their appointed representatives, who acquire the premises, 
plant, and material appropriate to a manufacturing or other 
business, and hire for wages the labour necessary to utilise 
this ‘capital’ in order to produce profit. While then the eco¬ 
nomic system comprises many types of business and many 
sorts of activity which lie outside this definition of capital¬ 
ism, the latter still remains so dominant as to make it the 
central feature in any attempt to assess economic activities 
and values in terms of human welfare. 


CHAPTER II 

THE MEANING OF WELFARE 

§ 1. The gravest preliminary difficulty that confronts us 
in this task of relating economic activities and thought to 
ethical arises from a failure to get a sufficiently clear agree¬ 
ment as to the meaning of the term, human welfare. Alike 
by professional economists and by enlightened business men 
much has recently been said and written about the steps 
needed to bring the aims, methods, and results of human en¬ 
terprise into closer accord with some ideals of human service, 
and the term 'welfare’ has been freely used as the criterion of 
a sound economy. 

But welfare may mean anything, frbm the most elevated 
conception of human character and destiny to the baths, re¬ 
fectories, and recreation grounds that figure so prominently 
in what is known as “welfare work”. Now although all 
large terms in common use defy exact definition, it is none 
the less desirable to fasten some agreed and consistent con¬ 
notation upon the key word to our enquiry. 1 We sometimes 
gain a little ground at the start by shifting from one term on 
to another that has acquired some conventional connexion 

1 Dr. Pigou, in the opening of his Economics of W elf are, informs 
his readers that “There is no need here to enter upon a general dis¬ 
cussion of its (i.e. welfare’s) contents.” “It will be sufficient to lay 
down more or less dogmatically two propositions; first, that welfare 
includes states of consciousness only, and not material things; sec¬ 
ondly, that welfare can be brought under the category of more or 
less.” (Economics of Welfare, 1920, p. 10.) Both propositions are, 
as we shall see, disputable, while the refusal of a general discussion of 
the contents of welfare gives a needless measure of uncertainty to 
every one of the practical applications in Dr. Pigou’s treatise. 

10 


THE MEANING OF WELFARE 


11 


with it. In any discussion of welfare a term that is bound 
to come up soon is value. And this term is evidently useful, 
even essential, to our purpose, because of the central place it 
occupies both in Economics and in Ethics. Our subject, in¬ 
deed, may appropriately be expressed as that of the relations 
between economic and ethical, or human, values. And we 
may start upon our enquiry by premising that welfare con¬ 
sists of ordered, organised values. This, it may be com¬ 
plained, does not carry us far, for value seems an even vaguer 
and more attenuated concept than welfare. Yet we cannot 
clarify our conception of human welfare without some classi¬ 
fication and assessment of those distinguishable elements to 
which the word ‘value’ is commonly applied. Indeed, it is 
not possible to avoid this path in attempting to relate ethics 
to economics. For Ethics is the science and art of human 
values, as Economics is of economic values. 

This statement no doubt requires defence. For in the 
minds of many, perhaps of most, ethics is attached to a spe¬ 
cial class of values, designated moral, related to rights and 
obligations. “The distinctive character of Ethics,” writes 
Maciver, “is that it is concerned with the question of ought, 
the question of right and wrong, good and evil.” 1 But this 
Hebraic note, this limitation of ‘ought’ and ‘right’, has never 
been accepted fully by the ordinary man. ‘You ought to 
have done the sum this way’, ‘You ought to keep your body 
still in playing the stroke’, ‘You ought not to wear this hat 
with that blouse’. Not only popular parlance, but popular 
thought and feeling, have always broken down the barrier 
between ‘moral’ and other criteria of conduct. Indeed, ordi- 
dinary speech, even in its origins, attests a preference for 
aesthetics rather than morals as the principal criterion of 
value. ‘Right’ itself is of strictly aesthetic origin. ‘Straight’ 
and ‘crooked’ conduct have a stronger purchase on most 
minds than ‘good’ or ‘bad’. No higher ‘moral’ approval is 
1 Community, p. 56. 


12 


THE MEANING OF WELFARE 


conveyed than by the term ‘a white man’ — whiteness having 
here a fuller connotation than mere innocence. Beauty of 
character, the schone Seele, is more than goodness. Greek 
thinking, especially as given in its master, Plato, saw the 
good life in terms of beauty, harmony, and grace . 1 As mod¬ 
ern thought turns more away from the distinctively Hebraic 
conception of goodness, the same preference is discernible. 
Characteristic expression is given to this tendency in a re¬ 
cent essay of Professor J. S. Mackenzie who, discussing the 
conception of “intrinsic value” in the ethical scheme, says, 
“further reflection has convinced me that, if any single term 
is to be used to characterise it, Beauty (at least in the sense 
in which the Greeks used the term to kolXov) is less inade¬ 
quate than any other.” 2 

But in point of fact neither Beauty, Truth, nor Goodness 
can claim a suzerainty over values. For, in the first place, 
they are distinguishable more as stresses than as objects, and, 
secondly, they do not among them exhaust the categories of 
human values. ‘Good’ admittedly has other than a ‘moral’ 

1 “Let our artists rather be those who are gifted to discern the true 
nature of beauty and grace; then will our youth dwell in the land of 
health, amid fair sights and sounds; and beauty, the effluence of fair 
works, will visit the eye and ear, like a healthful breeze from a pure 
region, and insensibly draw the soul even in childhood into harmony 
with the beauty of reason.” 

“ ‘There can be no nobler training than that/ he replied.” 

“ ‘And, therefore/ I said, ‘Glancon, music training is a more potent 
instrument than any other, because rhythm and harmony find their 
way into the secret places of the soul, on which they mightily fasten, 
imparting grace, and making the soul graceful of him who is rightly 
educated, or ungraceful of him who is ill-educated; and also because 
he who has received this true education of the inner being will most 
shrewdly perceive omissions or faults in art and nature, and with a true 
taste, while he praises and rejoices over and receives into his soul the 
good, and becomes noble and good, he will justly blame and hate the 
bad, now in the days of his youth, even before he is able to know the 
reason why; and when reason comes in he will recognise and salute 
her as a friend with whom his education has made him long familiar.’ ”] 
( Republic, Book III, Jowett’s translation.) 

2 Contemporary British Philosophy , p. 243. 


THE MEANING OF WELFARE 


13 


significance, as when it is applied to health, luck, a hypothe¬ 
sis, or a portrait. Nor is ‘True’ of purely intellectual import, 
as it is applied to an eye, a measure, or a friend. ‘Beautiful’ 
may be predicated of a character, the solution of a problem, 
or a surgical operation. Nor can we accept the statement of 
F. H. Bradley that “goodness, beauty and truth are all there 
is which in the end is real”, or Windelband’s declaration that 
“Logical, ethical, and aesthetic values make up the entire 
range of the human value-activity which can lay claim to 
general recognition and the necessity of actual unconditional¬ 
ness. There can be, as regards content, no further universal 
values beyond these three, because in these the entire prov¬ 
ince of psychical activity is exhausted.” 1 

Such terms as ‘real’, ‘universal’, ‘unconditional’ only 
darken counsel, when we seek a clear significance for human 
values, as elements of Welfare. Nor can we assume without 
discussion that all values are purely ‘psychical’ in the sense 
of figuring in consciousness. A good digestion is one that 
never obtrudes into the consciousness of its owner. Nor 
does a good conscience. But shall we say that these are not 
values, but only conditions for the attainment of satisfac¬ 
tions which do emerge as conscious values? 

§ 2. It is pretty evident that, at any rate for our purpose, 
it will be better to begin our search for values not in the high 
abstractions of philosophic thought but in the lower levels of 
human nature — the instincts, appetites, and behaviour of 
the animal man. This method recommends itself the more 
in that most economic ‘goods’, which we shall seek to corre¬ 
late with human good or value, are devoted to the satisfaction 
of the physical needs of man. 

We may begin lower down than man in the scale of organic 
life, and ask what are the simple ‘values’ or serviceable 
properties which Nature confers upon an organism. If we 
ask, ‘What is an organism for?’ there are those who will ob- 
1 Quoted by Inge in Contemporary Philosophy, p. 195. 


14 


THE MEANING OF WELFARE 


ject that we have no right to assume a purpose. We will, 
therefore, content ourselves with saying that many organ¬ 
isms behave as if their activities were directed mainly to the 
maintenance of the species. In vegetable and animal econ¬ 
omy on its lower levels the subordination of the ‘ interests’ of 
the individual to those of the species is everywhere in evi¬ 
dence. Even in the more highly developed life of the ant or 
bee, where some considerable measure of consciousness may 
accompany the elaborate behaviour, the whole economy of 
the heap or hive is adjusted to the safeguarding of the com¬ 
munity in the future, and instinctive sacrifices of the most 
rigorous order are performed by the individual members. It 
may even be questioned whether the survival of any single 
species can be regarded as a separable ‘end’, or ‘interest’, or 
‘value’. The elaborate inter-dependence of different species, 
genera, or orders of organic life in the economy of Nature — 
their competition, cooperation, or parasitic relations — may 
seem, indeed, to place value and purpose, if anywhere, in the 
total harmony of nature as a whole. Such speculations, 
however, would carry us too far afield. Here they may 
serve mainly as a warning of the difficulties which beset the 
search for value in its most general meaning. 

A new line of value seems to open up when the members of 
a species not merely survive but develop, in the sense of 
gaining more complexity in structure and function for the 
task of dealing with their environment. How far the ap¬ 
pearance of favourable variations, which are the germs of 
such development, proceeds from some directive activity 
driving matter to arrange itself in ever higher ‘wholes’, as 
General Smuts, with the support of a new school of evolu¬ 
tionary creationists, contends, 1 we need not here decide. 
Any statement upon this subject is better deferred until we 
consider more closely the composition of values in a per¬ 
sonality and a community. Here we may best confine our- 
1 Holism and Evolution, Macmillan. 


15 


THE MEANING OF WELFARE 

\ 

selves to the broad survey of an evolutionary process which 
presents a continually increasing surplus of organic energy 
over and above the requirements for specific survival. That 
surplus is increasingly available for the enrichment of the 
life of the individual organism. In the life of lower animals 
it is due either to variations enabling the animal to make a 
better use of its environment, by means of personal or group 
activities, or else to some favouring change in the environ¬ 
ment itself, some climatic change, or the elimination of some 
‘enemy’. 

§ 3. But the economy of human progress presents a new 
character, viz., the progressive conquest and adaptation of 
environment by arts capable of transmission and enabling 
man to utilise a growing surplus of energy and opportunity 
over and above the requirements for racial survival. With 
civilisation the individual becomes more complex in his ac¬ 
tivities and more conscious in their exercise. He comes more 
and more to have ‘a mind of his own’, interests and satisfac¬ 
tions which are the ingredients of what we call a ‘personal¬ 
ity’. But though, as man becomes more civilised, this mind 
of his asserts a paramountcy, the body does not allow its inter¬ 
ests to be forgotten, and constantly reminds the most intel¬ 
lectual and spiritual amongst us that in the first and last re¬ 
sort we are animal organisms, and that the raw stuff from 
which all the human values — the elements of welfare — 
proceed — elan vital, libido, nisus, horme, whatever name be 
given — is, in its make and conditions, more akin to the body 
than to the higher functions of the mind. Professor Mac- 
Dougall gives adequate expression to this truth when he says, 
“The evolution of the animal world may properly be con¬ 
ceived as primarily and essentially the differentiation of in¬ 
stinctive tendencies from some primordial capacity to 
strive.” 1 

‘But’, it may be asked, ‘does value attach to a capacity to 
1 Outlines of Psychology , p. 113. 


16 


THE MEANING OF WELFARE 


strive, to the instinctive tendencies that differentiate them¬ 
selves therefrom, or does it only emerge when intelligence 
supervenes upon and in part displaces instinct, and when con¬ 
sciously purposive behaviour builds up personality and plans 
the ‘good’ of humanity’? ‘OF, in other words, ‘does value be¬ 
long not to human activity, as such, but to the conscious 
satisfactions that accompany it, human happiness?’ 

§ 4. This brings us nearer to our crucial issue. How far 
does human value attach to activities as such, how far to 
the satisfactions that accompany activities? Personally I am 
inclined to identify Welfare and its values with conscious 
satisfactions, so rescuing Ethics from vague conceptions of 
self-realisation, in order to make of it a New Utilitarianism 
in which physical, intellectual, and moral satisfactions will 
rank in their due places. Activities, efforts, achievements, 
would in this economy be ‘valued’ purely in terms of the con¬ 
tribution which they made to the aggregate of conscious 
satisfaction, or human happiness. Not, however, necessa¬ 
rily the greatest happiness of the greatest number, for quality 
must also count in satisfactions. As J. S. Mill discovered, 
Utilitarianism must be so conceived and stated as to admit 
qualities of happiness. But this implies a standard of these 
values. What can that standard be? Each man’s various 
and changing preferences? That subjectiveness spells in¬ 
tellectual chaos. We shall perhaps do better to seek our 
standard in the conception of man as a psycho-physical or¬ 
ganism with various related satisfactions of its functions. 
Organic unity, the good life as a whole, personality in its 
wide sense, may best serve our purpose. But in thus stress¬ 
ing the organism as a standard of values, there is danger of 
over-individualisation. Welfare, it may be said, is thus 
made a merely individual concept, and ‘social welfare’ is 
denied any real significance. But though the question of the 
possible extension of organism to a society or community 
cannot be evaded, and the ‘organic’ or ‘organised’ relations 


THE MEANING OF WELFARE 


17 


between the members of a society must have some real bear¬ 
ing upon welfare, this does not debar us from beginning our 
attempt to build up a standard of values upon the basis of a 
psycho-physical organism. In all organic life there is a 
limited amount of transmitted activity, or urge, capacity to 
strive, directed to secure the survival and growth of the in¬ 
dividual and species. It belongs to the economy of this 
struggle that some direction of the several instinctive urges 
and desires in the interest of the organic whole should be 
exercised. This directive control, so far as it is conscious, is 
some thin form of ‘reason’, and it involves some conscious or 
intuitive valuation of the claims of the several instincts 
upon the organic resources. It is staff work, and in man be¬ 
comes more and more specialised in the brain. Man thus 
becomes the reasonable animal, and instead of leaving the 
urge of life to the wild and arbitrary claims of the several 
primary instincts or to the demands of specific survival, he 
disposes of as much of the ‘urge’ as he can control along lines 
of conduct directed by a conscious regard for his general 
career and character. This control of the coordinating rea¬ 
son is always very incomplete, and some turbulent passion is 
liable to seize the reins of government. But, normally, rea¬ 
son, in its humbler guise of commonsense, manages to set 
limits upon the separatist desires. When Hobbes declared 
that “Reason is and always must be the servant of the pas¬ 
sions”, he was posing as a moral anarchist. For though 
modern psychology everywhere displays the craft with which 
the passions ‘rationalise’ their cravings, it is none the less 
true that the whole development of the orderly institutions 
and practices of civilised societies attests the normal su¬ 
premacy of reason. 

Indeed, the instinctive cooperation of the organs of the 
physical organism for the protection and well-being of the 
whole is the first in a series of experiments in the art of fed¬ 
eral government, the reconcilement of the interests of the one 


18 


THE MEANING OF WELFARE 


and the many. The cooperation of the instinctive urges and 
activities, involving the arts of repression, stimulation, and 
sublimation, is the whole substance of the life of man. 

Here we may pause to ask, how far this distinctively bio¬ 
logical conception of human life and its welfare is fundamen¬ 
tally affected by the development of self-consciousness and 
the reasonable mind. There is a conflict on this point be¬ 
tween psychologists. McDougall holds 1 “The instinctive 
impulses determine the end of all activities, and supply the 
driving power by which all mental activities are maintained: 
and all the complex intellectual apparatus of the most highly 
developed mind is but a means to this end, is but the instru¬ 
ment by which these impulses seek their satisfactions, while 
pleasure and pain do but serve to guide them in their choice 
of the means.” 

To this Messrs. Graham Wallas and Hobhouse take ex¬ 
ception. The former 2 insists that, “We are born with a 
tendency, under appropriate circumstances, to think, which 
is as original and independent as our tendency, under ap¬ 
propriate circumstances, to run away.” 

McDougall himself admits ‘curiosity’ in his list of instincts. 
But is he right? Each instinct seems to have a ‘cunning’ of 
its own which implies ‘curiosity’ and some power of learning 
by trial and error. Is there a disinterested tendency or dis¬ 
position to think? Is it original, or does it emerge later in 
‘play of the mind’? The sportsman develops a ‘disinter¬ 
ested’ desire to hunt and kill, utilising a primitive biological 
utility as a source of pleasure. 

The ‘original tendency to think’ was possibly no more than 
the dim consciousness which impelled the various organs to 
cooperate for purposes of survival, together with the ‘curios¬ 
ity’ which accompanied the operations of each instinct in 
handling its opportunities and obstacles. But when, as in 
man, the conduct of the conscious common policy of the or- 
1 Social Psychology, p, 44, 2 The Great Society, p, 42. 


THE MEANING OF WELFARE 


19 


ganism became specialised in the brain, this organ may have 
utilized a portion of the energy placed at its disposal for 
‘play’, i.e., for immediately disinterested use. Curiosity and 
the reasoning process may, therefore, be conceived primarily 
as working in the interests of individual and specific survival 
and development. But their ‘play’ though, like all sound 
physical sports or exercises, endowed with biological utility, 
came more and more to be valued on its own account as ‘dis¬ 
interested culture’, and to pride itself upon its non-utility. 
This appearance, however, must not deceive us. The brain 
remains an organ and servant of the human organism, and 
all its functions subserve the organic interest or ‘purpose’. 
Our intellectual play, therefore, in its highest reaches, where 
it is least concerned for the promotion of any end but truth, 
as in mathematics or philosophy, contributes indirectly to 
biological utility by making the mind a more efficient instru¬ 
ment for all its practical work. All play, physical, intel¬ 
lectual, emotional, is evolved for this biological utility. But 
not being directly and immediately linked to utility, it is 
misconceived as being free and an end in itself. A wide 
measure of liberty is, indeed, accorded to all forms of play, 
and the development of personality is largely a product of 
this freedom of intellectual and emotional experiment. But 
this development of ‘personality’, in which the individual 
comes to play a larger and larger part in the specific life, is 
itself contained in the process (or purpose) of organic evolu¬ 
tion. These various plays have satisfactions of their own, 
values which may be kept distinct from those appertaining 
to the organic ends they serve. These pleasures, or satisfac¬ 
tions, may, indeed, stimulate exercise in the play processes, a 
prodigality of expenditure of time and ‘surplus’ energy dam¬ 
aging to the economy of life. This is readily recognised in 
the sportsman who exploits for his pleasure activities of pur¬ 
suit, conflict, and adventure, once needed to furnish food and 
protection to primitive man, and endowed with pleasure in 


20 


THE MEANING OF WELFARE 


order to sustain their useful efforts. A man who can get 
others to do his useful work may devote himself to sport. 
Or he may devote himself to mental games, to scientific re¬ 
search, or to literary pursuits of a wholly unproductive order, 
playing with his mind just as the sportsman plays with his 
body, and reaping the pleasures of the mental exercise. 

In a society economically constituted as ours is, there is 
nothing to prevent, and much to encourage, a waste or mis¬ 
direction of ‘surplus energy’ in forms of physical and intel¬ 
lectual play which make no real contribution to a soundly 
developed personality or to the welfare of mankind. For 
such play exhibits in the most dramatic way the self-assertive 
urge which is the greatest enemy of social discipline and or¬ 
der. To be able to devote all one’s time to ‘play’ (useless 
activity) signifies the confident ability to force others to feed, 
clothe, and otherwise keep us. This dependence upon others 
is often explained by a strange inversion as the possession of 
an ‘independent’ income. The full waste, however, from an 
excessive liberation of play processes in our cultural life, in 
the development of perverted forms of intellectualism, and 
art, is seldom if ever appreciated, though Mr. Yeblen has ap¬ 
plied revealing analyses to some of the forms it takes in cases 
of conspicuous leisure. 

As individuality and a personal life come to play a richer 
role in the economy of evolution, activities and satisfactions 
closely related to the mind will figure more prominently as 
values or sources of value. Happiness will be raised to a 
higher plane. But though prepared to express all human 
values, and therefore all welfare, in terms of desirable con¬ 
sciousness, we need not go so far as some psychologists in dis¬ 
tinguishing mind from body and in elevating the former to a 
seat of separate supreme authority. 

Professor Hobhouse goes, I think, too far in his insistence 
that mind is “the emotional principle in reality” 1 and has an 
1 Contemporary British Philosophy, p. 180. 


THE MEANING OF WELFARE 


21 


interest of its own, apart from the interest of the psycho¬ 
physical organism as a whole, and the specific life of which 
it is part. While admitting that “conation directed to stock 
preservation has of course high survival value and so far the 
development of mind presents neither less nor more difficulty 
than that of a useful limit”, he cites certain mind develop¬ 
ment to which he denies ‘survival value”. But the cases he 
cites, in particular “aesthetic tastes” and the “cognitive in¬ 
terest”, hardly sustain his contention. For, though they may 
not have much survival value for the individual, they cer¬ 
tainly have for the stock or race, and it is “stock preserva¬ 
tion” which he has taken for his test. I should, however, 
urge that even for individual survival the cognitive interest, 
though involving risks, has clear value, and that the same 
holds of “the social feeling” which he says is “of dubious value 
biologically to the individual”. 

§ 5. In working out the basic theory of Welfare in Human 
Values, I incline to adhere closely to the conception of man 
as a psycho-physical organism, Welfare emerging in an or¬ 
ganic harmonious cooperation of interrelated physical and 
mental activities. This organic harmony takes three dis¬ 
tinguishable shapes in the individual economy. 

(1) The healthy functioning of the body, mainly by sub¬ 
conscious or low-conscious actions. To this belong the due 
adjustments of diet, exercise, and skilled operations of the 
body. This physical efficiency is the basis of personal wel¬ 
fare. 

(2) The education and practice of mental activities, the 
acquisition of knowledge, thought, imagination, the cultiva¬ 
tion of the emotions under the guidance of a reasonable will. 
This mental development is designated culture. 

(3) The close linkage of body and mind in every depart¬ 
ment of the intellectual and emotional life is enforced by 
modern biology and psychology. Perhaps the most remark¬ 
able recent testimony is the discovery of the part played in 


22 


THE MEANING OF WELFARE 


our emotional economy by the ductless glands and the dis¬ 
charges of their hormones. Human nature thus presents it¬ 
self as an ordered equipment of organs and cells, stirred to 
activities that are contributory to the survival and develop¬ 
ment of the individual and the species, with a physical at¬ 
tachment of desires and conscious satisfactions, under the 
more or less effective control of a central directive sense or in¬ 
telligence exercising some orderly government over the in¬ 
stinctive urges by coordination, suppression, repression, sub¬ 
limation, in the interests of the organism as a whole. 

While then the welfare attaching to this psycho-physical 
organism in its activities may be held to consist in states of 
desirable consciousness, with values assessable by some 
standard yet to be determined, this implies no disparagement 
of the non-conscious or distinctively physical factors, 
whether in the human body or in its external environment, 
that are the necessary conditions and sources of this con¬ 
scious welfare. 


CHAPTER III 

WELFARE THROUGH COMMUNITY 

§ 1. Our enquiry into Welfare has so far, proceeding 
along the biological path of organic evolution, been confined 
to individual economy, though this individual economy con¬ 
tains instinctive provisions for the survival and evolution of 
the species. But we shall rightly be reminded that, body and 
mind, the individual is a social being. He could not come 
into existence or survive apart from the social heritage and 
environment in which he lives and moves and has his being. 
No study of man’s welfare and its values can, therefore, go far 
without becoming entangled in that web of associations and 
organisations which expresses the social disposition and ac¬ 
tivities of man. 

Psychologists usually see the origin and meaning of social 
organisation, partly in the instinctive desires or ‘dispostions’ 
of the individual man, the sex instinct and the ensuant ‘ten¬ 
der feeling’ for the young, needed to secure their protection, 
with the more disputable instinct of gregariousness; partly, 
in the intelligent recognition of each that his personal inter¬ 
ests are subserved by cooperation with his fellows. Thus 
the family, in its crudest form a device for racial survival, 
becomes a community with various cooperative functions 
for the provision of food, shelter, defence, dances and other 
rites, while local groups of families related by blood and com¬ 
mon interests cooperate for the performance of certain other 
economic, political, and religious functions. Further exten¬ 
sions of group areas for social, political, economic, and other 
purposes give us tribal, provincial, national, and interna- 

23 


24 


WELFARE THROUGH COMMUNITY 


tional community, while within each wider sphere of activity 
special interests weave for themselves innumerable webs of 
association. 

While, on the one hand, these modes of cooperative activ¬ 
ity enrich the individual life and personality by giving man 
a better control of his environment and so rendering material 
progress possible, on the other hand, they evoke something 
that is called ‘a common consciousness’. Here we are con¬ 
fronted with a problem we cannot shirk. If persons cooper¬ 
ate, whether for some common good in which they all partici¬ 
pate, as in public worship or national defence, or in order 
better to achieve some purely personal end, as in the form of 
cooperation termed commerce, the practice of such associa¬ 
tion engenders social feeling, sympathy. Admittedly there 
is a change wrought in the thinking and feeling of men who 
are brought into these associations. They become more so¬ 
cial in their consciousness. Their values and their welfare 
become more social by reason of the extension of their person¬ 
ality through sympathetic contacts with others. 

But is this all? Or can we attribute to group life and its 
associations some value other than what is contained in the 
consciousness of the several members of the group or society? 
This is the issue raised by ‘esprit de corps’, ‘public opinion’, 
patriotism, party spirit, ‘the communion of saints’. Are 
these collective terms anything more than expressions of cer¬ 
tain changes of feeling and view common to all the members 
of the association and produced by the associative process? 

A church, a university, a political party, may, it is said, be 
in itself valuable, have a significance or spiritual use, even a 
sort of ‘life’, binding together, as it does, in some common 
service not only the existing members of such association, but 
past, present, and future generations. But is this corporate 
life anything other than the thoughts, feelings, emotions, ac¬ 
tivities of its members? 

There have been sociologists prepared to treat the State, 


WELFARE THROUGH COMMUNITY 


25 


the economic system, the church, and other 'societies' as or¬ 
ganisms, and to ascribe to them a life and consciousness 
similar to those ascribed to the animal organism. Schaffle, 
Spencer, and others have pressed the analogy far. There are 
obvious difficulties to its acceptance. Are these social or¬ 
ganisms psycho-physical like the human organisms? If so, 
the same bodies must enter into many diverse social organ¬ 
isms. The body of Jones, as well as his psyche, must be a 
'cell' in some national organism, in some party, church, club, 
and many other associations. If so, the Jones cell can only 
function in one of these social organisms at a time, and this 
seems to negate all continuity of life for such societies. This 
is for me a graver difficulty than the alleged absence of a 
sensorium, for the government or committee of a society may 
claim in their real presence and control to function as a sen¬ 
sorium. Nor is the absence in a social organism of an integu¬ 
ment containing the constituent cells and organs so fatal an 
objection as it sometimes seems. Biologists recognise many 
compound or colonial animals which, though their parts are 
physically specialised for the performance of certain func¬ 
tions within the group-economy of the animal, are capable 
of living separated from the mass. 1 It is difficult to deny to 
societies of ants, whose divisions of function are expressed by 
definite structural differentiations among the individual or¬ 
ganisms, the existence of a social organic structure, and, 
so far as consciousness is required for the conduct of such 
organic life, it will be at any rate in part a group-conscious¬ 
ness. 

It would, however, be foolish to suggest that any human 
society or association displays any such order or organic 
structure on its physical side, or that there is any such sol¬ 
idarity of social purpose as appears to be exhibited in the in¬ 
stinctive and self-sacrificing cooperation of the hive or ant¬ 
hill. 

1 Cf. Espinas, Les Societes animales. 


26 


WELFARE THROUGH COMMUNITY 


§ 2. The real issue, so far as it affects our treatment of hu¬ 
man values, turns upon the question of the recognition or 
meaning of a group-mind, or a social mind. Most sociolo¬ 
gists repudiate the existence of any social mind. Though 
Professor Hobhouse admits for discussion “what we may call 
the social mind”, he understands by that term “the order 
formed by operation of mind on mind, incorporated with so¬ 
cial tradition handed on by language and by social institu¬ 
tions of many kinds, and shaping the ideas and the practice 
of each new generation that grows up under its shadow.” 1 
There is for him no social consciousness. Mr. Maciver is 
equally explicit in his repudiation. “There are no individ¬ 
uals who are not social individuals, and there is no social 
mind which is not individual mind.” 2 Professor Perry ex¬ 
presses himself with even fuller emphasis, declaring that, 
“Although a society is a whole, system and individual, com¬ 
posed of interested, willing, thinking, self-conscious, free, 
responsible, and happy men, a society does not have or take 
an interest of its own, does not will or think, is not self-con¬ 
scious, free or responsible, and does not enjoy happiness.” 3 
Yet Professor Perry does not reject all use of the term “social 
mind”, but accepts from Professor Davis the view that, the 
‘social mind’ in this sense is “common mental contact, com¬ 
mon mental qualities and characteristics, which are realised 
by these individual members to be common, and which when 
so realised operate as “dynamic social agents upon individ¬ 
uals during childhood and maturity”. 4 We may here ap¬ 
pend the statement of Professor Davis that “the dynamic 
agent of the psycho-social unity is the social mind, a mass 
of common beliefs, sentiments, and determinations, pursued 
by the individuals of a group with the added consciousness 

1 Development and Purpose, p. 12. 

2 Community, p. 62. 

3 General Theory of Value, p. 460. 

4 General Theory of Value, p. 508. 


WELFARE THROUGH COMMUNITY 


27 


that the other members simultaneously cherish them.” 1 Dr. 
Barker, however, holds that there is a social mind which is 
“something that exists in and along with the separate minds 
of its members, and over and above any sum of those minds 
created by mere addition.” 2 

It will, I think, be admitted by all these thinkers that or¬ 
ganised cooperation, the voluntary participation of individ¬ 
uals in some common activity, can produce a valuable effect, 
spiritual or even material, different both in quantity and in 
character from that which the unorganised activities of the 
individual participants could compass. An orchestra, team¬ 
work of any kind, economic cooperation by division of labour 
or exchange of goods, achieves a result which can not properly 
be resolved into the separate contributions of the cooperants 
without losing its essential character. The symphony, the 
church service, the cricket match, even the working of a 
steamer or a factory are not mere additions of the separate 
contributions of those who take part. The unity of the plan 
or purpose, the harmony which they express, is the essential 
character of the joint activity and carries a corresponding 
unity of consentient feeling in the participants. If I am told 
that after all this feeling is only existent in the particular 
participants, I shall not demur, but shall merely stress the 
fact that the participation produces and communicates feel¬ 
ings that could not be experienced otherwise than by this 
common organised activity. This is indeed true of all or¬ 
ganic life: the feelings, thoughts, emotions, will, which I ex¬ 
perience are only implemented by the cooperation of the in¬ 
dividual cells in my brain and nervous system. But this does 
not preclude the judgment that I think and feel and will. 
Though the community, represented in an orchestra or a 
church service, is a briefer unity and affects its participants 
more partially, the product, alike as an objective entity and 

1 Davis’, Psychological Interpretations of Society, p. 68. 

2 Quoted Ginsberg, Psychology of Society, p. 63. 


28 


WELFARE THROUGH COMMUNITY 


as a desirable consciousness, appears in principle so single 
and unique in character as to lose in meaning if assigned to 
the separate activities and feelings of its individual cooper- 
ants. 1 

§ 3. In any consideration of the relation of economic to 
human welfare, community bulks so big as to compel us to a 
somewhat closer exploration of the community sense and 
sentiment. 

Two predispositions incline most ‘intellectuals' either to 
reject or to disparage the existence or worth of community 
sentiment and to regard the feelings, tastes, conscience of in¬ 
dividuals as the sole source and arbiter of value. One is the 
dread of a ‘herd-mind’ identified with mob rule, disorder, and 
ochlocracy. ‘Intellectuals' are essentially introverts, culti¬ 
vating their separate minds, jealous of spiritual autonomy, 
and hostile to such cooperation as will expose their minds to 
mass-suggestion or to any sort of surrender of the control of 
their separate consciousness. The other is the apprehension 
of a God-state or church, under which either dominant per¬ 
sonalities or dogmas exercise a devastating discipline over 

!Dr. W. Y. Elliott, in denying “mind” and “conscious unity” to 
group association, seems to me to strain differences of degree into dif¬ 
ferences of kind. “Mind”, he holds, “is organic; the group-thinking of 
associated individuals is co-organic.” (The Pragmatic Revolt in Poli¬ 
tics , p. 386.) Elsewhere (p. 382) he claims for “the individual mind” 
that it is a system of a peculiar order in that “it forms not inter-mental 
relationships, but mental relationships within a single self-conscious¬ 
ness.” Now the “unity” as “singleness” of individual personality dif¬ 
fers widely in degree even in the same individual at different 
times under different conditions, quite irrespective of abnormal cases 
of dissociated personality. On the other hand, there is more single¬ 
ness in the mental activities of certain groups, under certain condi¬ 
tions, than Dr. Elliott seems to admit. It cannot be admitted of 
group life that “its will is dependent upon the ideas of two associated 
individuals” without adding that their wills are dependent upon it. 
But it may, for all that, be convenient to have some separate term to 
distinguish the federal unity of a group from the closer normal unity 
of the individual mind, and if the term “co-organic” advances that 
end, it may be well provisionally to adopt it. 


WELFARE THROUGH COMMUNITY 


29 


the private mind. Everywhere and always in history, the 
free life and mind of the individual have been so crushed, en¬ 
slaved, and moulded by tyrannies of State, Church, master¬ 
class, or parental authority, with customs, taboos, laws, and 
sanctions of their making, as to make suspect among free 
minds any other values, or ‘loyalties’, than those of con¬ 
scious personal choice. Among thinkers there is always fear 
of the ruder, more emotional urge of community life. Phi¬ 
losophers and saints are apt to ‘keep themselves to them¬ 
selves’, and perhaps to pride themselves upon so doing. 
These feelings, I think, colour the view taken by many sci¬ 
entific men about the nature of community. 

Even those who take the narrowest view of the limits of 
political government will regard peace and security of life 
and property either as values or as conditions of personal 
values. Associations of various kinds, for common benefits, 
ecclesiastical, political, economic, social, educational, recre¬ 
ative, may, of course, be treated not as things valuable per se 
but as instruments or apparatus by the use of which person¬ 
ality may be enriched — i.e., individual values emerge. But 
to deny all human value to the collective life of these associa¬ 
tions, and to put them on a par with a jointstock company 
which exists to earn dividends for its individual share¬ 
holders, is surely to take a narrow view of the vital functions 
of community work. 

Whether with Maciver (and others) we treat community 
and its network of associations as purely spiritual entities, 
expressing “relations of wills”, 1 or, as I would prefer, corpora¬ 
tions with all the concreteness of their material apparatus, 
the physical city as well as the civic will, the market place as 
well as the will to buy and sell, there is surely some virtue or 
value in the unity of the whole which is not expressible in the 
constituent elements. 

Are we to say that community in all its associations is 
1 Community, pp. 128-31. 


30 


WELFARE THROUGH COMMUNITY 


merely the opportunity for individual conscious values to 
arise? Peace and order and the primary functions of social 
government may possibly be treated as mere conditions. 
But shall we say the same of the more positive and concrete 
benefits which political and other social organs provide? Is 
there no value, no virtue, no spiritual riches in the traditions 
and history of the great city? Is Athens in the fifth century 
B.C. computable only in the added worth of its separate 
citizens? Is it mere rhetoric to speak of ‘the glory that was 
Greece, the grandeur that was Rome’? I see a beauty, a value 
in family life, not merely as ‘a relation of wills’, but as a 
happy cooperative activity in a home. So with a city — 
a country — and its people. 

It is not merely that persons living or acting together can 
do things — and so get values — which they could not do 
apart, nor merely that they are different persons though 
living and acting together, but that there is a general 
spirit, will, and achievement that have value, and that this 
spirit is embodied in physical forms and activities which con¬ 
tribute to the ‘value’. 

§ 4. That a good society gives opportunities to individuals 
is not a sufficient account of a good society. It also exists to 
pursue a worthy life of its own — and this life is not purely 
physical but has its spiritual expression or counterpart. 
This has a special application to economic society, as Dr. 
Marshall recognised. 

“Perhaps the earlier English economists confined their at¬ 
tentions too much to the motives of individual action. But 
in fact economists, like all other students of social science, 
are concerned with individuals chiefly as members of the so¬ 
cial organism. As a cathedral is something more than the 
stones of which it is made, as a person is something more than 
a series of thoughts and feelings, so the life of a society is 
something more than the sums of its individual members.” 1 

1 Principles, p. 57. 


WELFARE THROUGH COMMUNITY 31 

If this be so, it is difficult to refuse value to associations, 
or to deny that such values contribute to human welfare. 
But if we are agreed that welfare is ultimately reducible to 
desirable consciousness, we seem to be driven to admit that 
some collective consciousness and urge or purpose inhere in 
these associations as well as in the individuals who associate. 
But the expression “as well as” perhaps carries us further 
than we are prepared to go. For it is certain that the asso¬ 
ciation is ‘composed of’ and functions through the individual 
members, that whatever collective consciousness there may 
be is ‘in a sense’ their consciousness. But in what sense? 
Be it granted that all feeling and thinking emanate from 
individual centres of consciousness. But when individuals 
think or feel in association, the fact of association alters the 
nature of their thinking and feeling. 

It is not merely what Professor Giddings terms a “plural¬ 
istic response to a common stimulation”, 1 a self-stimulation 
made more intense by the recognition that others are under¬ 
going emotional excitement. There is a psycho-physical 
intercourse which not only strengthens but alters the feelings 
and behaviour of the participants. It produces, as indeed 
Professor Giddings admits, an associated behaviour, or co¬ 
operation, in which different parts are undertaken by the in¬ 
dividual cooperants. Even a mob, if held together by a com¬ 
mon excitement, will develop traits of leadership and follow¬ 
ing, the rudiments of an organization. It is, therefore, not 
enough to say that “the material of society is a plural num¬ 
ber of like-minded persons.” In a society, or even to a less 
degree in a herd of animals, there must be some elements of 
unlike-mindedness, essential to a cooperation which is not 
the performance of identical acts by a number of individuals, 
but a harmony of diverse activities. 

1 Studies in the Theory of Human Society, chap. IX. 

.Cf. Ethical Love, by E. W. Hirst, chap. VI, dealing with ‘The 
Significance of the Herd Instinct.” 


32 WELFARE THROUGH COMMUNITY 

Stated otherwise, associated thought and feeling are a spe¬ 
cial sort of consciousness, and carry values of their own. 
How far this signifies that minds interpenetrate, and in some 
degree combine or fuse, may well remain an open question. 
Perhaps the following citation from Dr. Ernest Barker will 
illustrate the perplexities that envelop this topic. 

“The unity of a nation — is not that of a person which 
transcends the persons of which the nation is composed; and 
there is no separate national mind or will or personality apart 
from the minds and wills and personalities of its members. 
National unity is not that of a mind, but that of a mental 
substance. It consists in a common structure or content of 
ideas —ideas made electric by feeling and therefore issuing 
in will and effort and action —which are resident in the 
minds of the members of a nation, and, except in so far as they 
are apprehended by the minds of members of other nations, 
are resident only in them.” 1 

If this leaves us in a logical quandary, it is only one of 
many such quandaries that confront us in our attempt to 
give precision to the relations of The one’ and the many 
wherever persons or things come together into wholes . An 
organised unity, or whole, cannot be explained adequately by 
any analysis of its constituent parts: its wholeness is a new 
product, with attributes not ascertainable in its parts, though 
in a sense derived from them. In this sense an association 
may have feelings, even thoughts, that are not found as such 
in the individual. Quakers find this in The sense of the 
meeting’. It is found also in one of the significations of 
'common sense’, not merely that sense which exists the same 
in each person, but a genuine ‘sensus communis’ which ani¬ 
mates and forms a flow of thought and feeling where people 
put their minds into the common stock and ‘get together’ in a 
spiritual way. 

Even those who reject common consciousness of any sort 
1 National Character, p. 135. 


WELFARE THROUGH COMMUNITY 33 

admit that one mind is affected by another both in feeling and 
in thinking, that in this sense there is sympathy and synesis 
from association. That human personality is enlarged and 
enriched by association will not be questioned. It is also 
important for the comprehension of social values to realise 
how association is enriched by personality. Prima facie 
there exists a disposition to regard ‘society’ in all its forms as 
a unifying, levelling influence, imposing upon persons of dif¬ 
ferent dispositions uniform codes of conduct, thus producing 
a mind of willing conformity. Some such levelling and re¬ 
pressive tendencies belong to all associations and organisa¬ 
tions. Members must obey rules which do not always fit 
their case. But they make these apparent sacrifices for two 
reasons. First, because they desire to participate in com¬ 
munal activities and experiences which demand this con¬ 
formity. Secondly, because they realise that both the give 
and the take of social life enlarge personal liberty and enrich 
personal life. 

§ 5. This is the paradox of association — of civilisation — 
that a man becomes at once more like and more unlike his 
fellows. The paradox is in reality easily resolved. For in 
the larger and more complex life which men get by associa¬ 
tion there can emerge at the same time more points of like¬ 
ness and more of difference. Though accepted rules, con¬ 
ventions, codes of behaviour impose a single standard, this 
is an economy of personality which leaves more energy, time, 
and opportunity for private individual enterprise and self- 
expression. But it is not only by thus enlarging the scope 
for non-associated activities that association helps person¬ 
ality. It does so more directly by evoking and utilising per¬ 
sonality in associative activities. The formal structure of 
an association is often deceptive. In most clubs, societies, 
political associations, there exists a formal equality of mem¬ 
bership that suggests an identity of function which does not 
actually exist, and which, were it operative, would be fatal 


34 


WELFARE THROUGH COMMUNITY 


to the well-working of the association. For in these diverse 
associations personality finds expression and achievement. 
The formal identity of object and equality of status does not 
mean that each member gets and gives the same. As club 
members all may pay the same subscription and have the 
same voting rights, the same right to be elected to the com¬ 
mittee, but some get more out of the club than others and 
contribute more to its functions and amenities. Associa¬ 
tions are fields for the play of personality — new personal 
values are there produced. But if we stress this significance 
of associations as affording opportunities to individuals to 
express and enrich themselves through organised contacts 
with others, shall we deny that such contacts, and even the 
organisations which furnish them, have value? 

The relation of individuals towards associations will differ. 
Some men evidently join a society, or take part in public 
work, for what they can get out of it — a calculated or more 
often a ‘natural selfishness. Others sacrifice ease, means, 
and ‘natural’ inclination to public spirit and philanthropy. 
They want to give rather than to get. There are thus two 
sorts and sources of value in associations, what you give to 
the association and what you personally get from it. Or per¬ 
haps three sorts of value, first, what you get directly in per¬ 
sonal benefit from the object of the association — the enjoy¬ 
ment of golf or some knowledge of botany or history; sec¬ 
ondly, the satisfaction from associating with others in a 
common cause or interest — breeding an attachment or ‘loy¬ 
alty’ to the institution. Thirdly, there is the ‘value’ attach¬ 
ing to the association which is an object of regard and loyalty 
and is psychically represented in the community of wills and 
activities of its members, past, present, and future. Such is 
the conception of the Catholic Church, the Liberal or Con¬ 
servative Party, the House of Commons. 

Test the issue in the simplest, smallest, and strongest asso¬ 
ciation, the family. You cannot explain the family without 


WELFARE THROUGH COMMUNITY 


35 


recognising in it these three sources and modes of value, that 
which each gets in physical and moral satisfaction and use 
from the common life in the home — operating differently on 
the persons as they are differently related to one another, 
father, mother, brothers, sisters, of various ages and disposi¬ 
tions. Then comes the sense in each of a common attach¬ 
ment, love, perhaps pride in the family name, character, and 
tradition. Lastly, there is the value of the family per se as 
a sound, well living, serviceable, prosperous stock. I cling 
to this third value and will not have it dissipated into the 
several personal values of the particular members of this 
family, past, present, and to come. 

The attribution of values to institutions or associations, as 
such, no doubt carries risks, which to some thinkers bulk so 
large that they are led to repudiation of all values not di¬ 
rectly translatable into personal ends. Mr. Maciver is 
haunted by this fear. 

“The history of progressive peoples constantly reveals the 
danger which arises when institutional forms become ossified, 
the danger that they may pervert instead of furthering the 
spirit, traditions, way of life out of which they arose. This 
is preeminently true when the institution is invested with 
sanctity, as in the case of ecclesiastical institutions.” “It 
has been well pointed out that the continuity and permanence 
of institutions, as contrasted with the short-lived race they 
serve, gives them often to our eyes a false character, as if 
they existed for themselves, or for some supra-personal 
end .” 1 

The exaltation of officialism and its divorce from the sense 
of service, intense conservatism, are natural defects of in¬ 
stitutions which acquire prestige and worship on their own 
account. But bureaucracy and conservatism are not in¬ 
herent in associations: they are due to failures of the living 
members to utilise the freedom of the associative processes. 

1 Community, pp. 162-3. 


36 


WELFARE THROUGH COMMUNITY 


If institutions fall too much into the hands of their perma¬ 
nent officials, it is because the spirit of association burns 
dimly in their membership. But this is not a reason for deny¬ 
ing value to an organisation and to the associative activities 
that comprise its ‘life’. 

I do not contest the principle that all human values are 
expressible in human happiness or desirable consciousness. 
But I object to the assumption that this welfare can always 
be carved up into the separate welfares of individual persons. 
There is a genuinely collective enjoyment of “joys that are 
in widest communalty spread”. 1 

§ 6. In modern life everyone is contained in a network of 
associations, to each of which he must contribute something 
in work or influence, and from which he must receive some¬ 
thing. Some are general. Everyone lives in a series of 
concentric circles of association which affect him in general 
as a human being. Such are the home, the neighbourhood 
(village or town), his class, his country, the world. These 
general contacts are of differing proximity, force, and inter¬ 
est. Each carries its influence, its loyalty — and conflicts of 
loyalty arise. In primitive life family and tribe were limits 
of association and loyalty. Civilisation has expanded areas 
and weakened narrower loyalties. But the weakening of the 
narrower primal associations has mainly been achieved by 
specialisation. The craft or profession, severing itself from 
the early household economy, has itself become a highly dif¬ 
ferentiated process in a wider cooperative enterprise. Re¬ 
ligion, education, morality, the arts and sciences, the social 
amenities and recreations, have passed away from the condi¬ 
tion of loose activities within the family or neighbourhood, 

1 The insistence upon the individuality of all values not merely 
weakens the conscious significance of associations, it impairs, if it does 
not destroy, the concept of a biological urge for the life of the species. 
Although the procreative urge comes into direct conscious expression 
in the individual parent, some value must surely be attributed to the 
wider biological urge or ‘purpose’ of the species. 


WELFARE THROUGH COMMUNITY 


37 


and have woven for themselves highly specialised societies, 
with growing areas of operation and elaborated governments. 
Politics itself is a conspicuous example of this joint expansion 
of area and specialisation of function. 

§ 7. All this is commonplace enough. But consider its 
bearing on values and welfare. I have represented these 
processes of association and community as enlargements and 
enrichments of personality — carrying greater liberty, ful¬ 
ness, and variety of life. The general benefits of cooperative 
action for many purposes are so great and obvious as to 
blind us to certain dangers and drawbacks. 

The tests are liberty in associative processes and efficiency 
of personality. It is said that associations become ‘ma¬ 
chinery’, that they so ‘mechanise’ their members that they 
become not free instruments by which the personality of 
these members may find expression, but forces wielded by 
‘officials’ and ‘specialists’ for power and control over others, 
imposing rules upon life which the ordinary members must 
accept without any personally free consent. Thus, it is 
argued, civilisation means standardisation in personal hab¬ 
its, in food, dress, dwelling, and all the material side of life, 
equally in culture, religion, politics, literature, art, and 
amusements. 

Associations, especially in politics and industry, have, it 
is maintained, escaped the effective control of their members, 
and so dominate and direct their wills, sentiments, and ac¬ 
tivities, as to cheapen and degrade human personality; they 
retard progress by stifling private criticism and experiment, 
thus impairing the values of free personality and the survival 
and emergence of ‘genius’. This is no new charge. As we 
are aware, it is part of the indictment of capitalism and ma¬ 
chine economy. But its wider formulation concerns us here, 
as affecting the conception of human welfare. 

The general case for associations as value-makers rests on 
the assumption that members are ‘free’ to enter them, that, 


38 


WELFARE THROUGH COMMUNITY 


having entered, they can find in the activities of the associa¬ 
tion free scope for any personal contributions they can make, 
and that they will take their share of gain from the free per¬ 
sonal contributions which others make to the general fund of 
health, knowledge, goodness, beauty, fun, which the associa¬ 
tion exists to supply. But if it be true that members are 
virtually compelled to enter certain political, economic, or 
religious associations, and that they find these bodies so 
strongly controlled by caucuses and officials that their par¬ 
ticular will, interests, or services can exercise no influence on 
the work of the association, while the functions of the asso¬ 
ciation, thus controlled, either are diverted from the good of 
the members to the ease, profit, or power of the administra¬ 
tion, or are engaged in enforcing orthodox and conventional 
types and patterns of conduct, behaviour, consumption, 
opinions, sentiments, upon their members — such associa¬ 
tions may be found to be turning out negative values. In this 
process industry with mass production, of course, plays a 
leading part. But industry is mostly concerned with bodily 
wants and utilities in which individual divergences are 
smaller and fewer. There are certain ‘goods’ that are good 
for all, or for most, and their standardisation is a large net 
economy. This applies likewise to things of the mind. 
Thus, there are certain common routines in education that 
are right and necessary, because minds, as well as bodies, are 
up to a certain level alike. Were it not so, society would be 
impossible. 

But well-ordered associations will not only furnish similar 
goods and services to similar persons, but will enable dis¬ 
similar persons to satisfy their dissimilar wants. This is a 
hard saying. It may be urged that persons can only asso¬ 
ciate by virtue of their similarity: they come together be¬ 
cause their common nature, or situation, demands common 
satisfaction which can better be got by cooperative than by 
solitary activity. An association cannot deal with the un- 


WELFARE THROUGH COMMUNITY 


39 


common, abnormal, unique, the strictly personal. All hu¬ 
man beings are alike: no two of them are alike! 

The danger of associations is in compelling or induc¬ 
ing the unlike into conformity. Here is the tyranny of the 
machine, the committee, Main Street, the multitude. Even 
here some qualification is needed. Certain conventions and 
codes of conduct, ways of living, are so necessary or con¬ 
venient that recalcitrants must either conform or get out. 
The Tdiotes’ — who claims in all matters to be a law to him¬ 
self — cannot be tolerated in any society. If he cannot be 
expelled from the political society of which he is a nominal 
member, he is shut up. But there is always danger in carry¬ 
ing too far this insistence on conformity. The ‘Idiot’ may 
be a genius, the recusant a saint. The defect of intolerance 
is inherent in organisation. Every power tends to exceed its 
rightful limits. Oppression and repression insensibly creep 
in to all associations. Heresy-hunting in an active sense is 
not the heaviest injury: more damaging is the constant, 
secret, unconscious pressure to submit, not to criticise, to con¬ 
form, not to rebel. So the seeds of novelty, the variations 
which yield new values, are starved. 

The modern State is in the centre of this controversy. Its 
laws and institutions are designed to secure certain standards 
of conduct and well-being, certain conformities held to be 
essential to public order, public health, public morals. Its 
new claims are innumerable, penetrating all departments of 
life, everywhere imposing standards of food, housing, sani¬ 
tation and hygiene, education, industrial conditions, extend¬ 
ing its control over transport and communications, moulding 
or curbing public opinion and morals by censorship and pro¬ 
hibitions. These restraints and provisions, it is argued, 
make for larger liberty and the emergence of new values in 
personality. Essentially the problem is one of the place of 
the expert in the economy of personal life. No one can know 
everything and do everything for himself. By association 


40 


WELFARE THROUGH COMMUNITY 


and organisation he can ‘hand over’ to experts not only the 
provision of most material needs, but health, education, re¬ 
ligion, art, science, literature, and other elements in personal 
welfare. So, by getting tested and accredited goods and 
services to satisfy his common human nature, he secures 
greater liberty and opportunity for the private pursuit and 
satisfaction of his strictly personal interests. 

But organised expertise has notorious dangers. The ex¬ 
pert is at once conservative and aggressive. Defence of the 
speciality that he has made his property causes him to be 
conservative. The tendency to magnify his office and ex¬ 
tend his rule makes him aggressive. This latter tendency 
is humorously illustrated in the fields of medical specialisa¬ 
tion. Dentist, aurist, oculist, throat specialist, tend to 
find their several centres of interest and income to be the 
fount and origin of every ill. In political officialism we find 
the same double trend, conservatism in the ritual of bureau¬ 
cracy, with a tendency to usurp powers of legislation and 
administration. 

It is not enough that associations and organisations, gen¬ 
eral and special, shall not invade the regions that should be 
sacred to personality. They must fulfill another requirement. 
They must preserve in themselves the seeds of reform and 
growth by encouraging, instead of repressing, research and 
criticism. New blood, new ideas, the zeal for reform and 
growth, are requisites of a vigorous association. This healthy 
life of associations thus depends upon the maintenance of 
genuine personal freedom in association. It is everywhere 
the problem of good government. Unless there is genuine 
participation by the members in the government and work 
of the association, they do not get its full value, even if it be 
conducted by zealous and honest experts. The absolute 
abandonment of personal discretion and judgment to rulers, 
lawyers, doctors, schoolmasters, stockholders, plumbers, or 
specialists in any field of knowledge or skill is doubly 


WELFARE THROUGH COMMUNITY 


41 


wrong. It places in the hands of experts a dangerous power. 
It weakens personality by an automatic acceptance of the 
judgment of another person in matters of importance to our¬ 
selves. 

§ 8. The alleged failure of democracy furnishes a test 
case. If popular self-government is to function effectively 
under the conditions of a modern civilised state, delicate 
adjustments of functions must exist between electors, repre¬ 
sentatives, ministers, administrators. In the discussion of 
the possibility of a real democracy much misunderstand¬ 
ing is due to the mistaken equalitarianism supposed to be 
involved. If all men were 1 equal’ in capacities, desires, 
and needs, they should play an equal part in all determinant 
processes of government, and receive from the political as¬ 
sociation equal benefits. But no such natural equality 
exists. It has become obvious that all citizens cannot 
and will not exercise an equally intelligent vote in choosing 
representatives and instructing them, that elected repre¬ 
sentatives will not be equally competent, zealous, and hon¬ 
est in exercising their powers, either for the making of laws 
or for the control of the executive. 

This is no place to discuss in detail reforms in political 
institutions, such as the initiative or veto, which shall en¬ 
gage the general body of an electorate in some responsible 
acts of will, or schemes of political education that may arouse 
a more intelligent and continuous interest in major issues 
of domestic and foreign policy. But human welfare, per¬ 
haps the very existence of Western civilisation, quite evi¬ 
dently depends upon the possibility of genuine popular self- 
government. The notion that self-appointed dictators of 
oligarchies can be trusted to defend the fortresses of liberty 
and personality is chimerical. The safeguard of democracy 
is ‘ common sense,’ the existence of a defensive intelligence 
founded partly on definite experience, partly perhaps on an 
inherited ‘herd’ instinct of protection. It is not a clear in- 


42 


WELFARE THROUGH COMMUNITY 


tellectual apprehension and logical application of large prin¬ 
ciples of government, but an aptitude for dealing with situa¬ 
tions and issues when they arise with some measure of con¬ 
sistency and wisdom. Democracy depends more upon get¬ 
ting conditions for the easy play of a somewhat more in¬ 
structed common sense than upon any other condition. That 
sense may not be equally distributed, but it is apt to emerge 
from discussion as the ‘ general sense of the meeting ’ and 
to express some common consent. 

But in considering the human values from associations, 
political or other, the idea that all persons should or must 
share equally in the advantages of association is just as false 
as the idea that they should contribute equally towards di¬ 
recting the association. ‘Equality of opportunity’ is often 
accepted as an obvious equity of government. Now such 
equality may be a sound working principle — but only be¬ 
cause there is so much likeness in the make-up and environ¬ 
ment of most individuals that their differences may safely 
be ignored for certain purposes. Nor can it be pressed far. 
Economy of social income or other resources requires that 
opportunities should be distributed according to capacity to 
use or enjoy them. To give equal attention to the education 
of the bright and the dull is wasteful, whether the result 
of education be reckoned in personal values or in social well¬ 
being. The whole principle of Equal Rights, indeed, is a 
survival of the belief that rights were innate and individual, 
instead of being socially made and conferred. As a practi¬ 
cal rule it may be justified so far as that, when individual 
capacities and needs cannot safely be estimated, it is best 
to treat all alike. This is the true defence for equality of 
political franchise. If it signified that the same amount of 
political power issued from the will of every citizen, wise and 
foolish, good and bad alike, the policy would be disastrous. 
In the State, as in other associations, each member gives 
and receives a contribution corresponding to his capacity for 


WELFARE THROUGH COMMUNITY 43 

giving and receiving. The formal status of equality never 
represents an equality of influence or gain. 1 

§ 9. This bare analysis of the 'articles of association' may 
serve two related purposes. First, its testimony to the 
part played by community in moulding the character and 
life of its members is needed to refute the stubborn individ¬ 
ualism which the separatist pride of personality dignifies 
under the title of spiritual autonomy. Body and soul, man 
is made and sustained by association, and the process of 
civilisation is nothing else than the progress of the arts of 
association. In any estimate of human welfare it is, there¬ 
fore, necessary to take our stand firmly on the principle of 
the social determination of values, even though we may hold 
that these values always fructify in the desirable conscious¬ 
ness, or happiness, of individual men and women. 

Secondly, it is important to realise that associations and 
organisations are not always a natural growth, a free expres¬ 
sion of common interests. They may be the artificial con¬ 
trivances of man, with special private interests to serve, im¬ 
posed upon the wider community. There may even be a 
tendency for associations, originally simple in their form, to 
amplify their scope, and complicate their structure, by virtue 
of some internal and almost automatic propulsion. At any 
rate, it would appear that in modern times the rapid growth, 
increased complexity, and expanding areas of organisations 
threaten to outstrip the capacity of men and women to de¬ 
velop a community sense adequate to the new demands. The 
reasoning powers, the judgment, the morale, the nervous 
system, of members of modern communities, it is contended, 
fail to adjust themselves to the new requirements. Some 
such trouble seems to lie at the roots of nearly all our politi¬ 
cal and social problems. Human animals living from pre- 

1 In his excellent treatise of social ethics, entitled Ethical Love 
(Allen & Unwin), Mr. E. W. Hirst urges the substitution of the term 
‘equity of opportunity’ for ‘equality of opportunity’ (p. 247). 


44 


WELFARE THROUGH COMMUNITY 


historic times in little simple local groups, virtually self- 
sufficing for the requirements of their narrow lives, have 
within a few generations been called upon to revolutionise 
all their ways of living, thinking, and feeling, all their tra¬ 
ditional modes of work, dissolving the narrow bonds of 
locality for national and world cooperation. No wonder they 
are bewildered and distracted in their fumbling attempts to 
use with safety and success the apparatus of modern institu¬ 
tions that gives concrete expression to this widening of 
horizons in politics, industry, science, and every other art of 
conduct. 


CHAPTER IV 

STANDARDS OF WELFARE 

§ 1. We have pursued our enquiry into human values and 
welfare so far along two routes. First, we have taken into 
our consideration the innate equipment of the human ani¬ 
mal, his instinctive urges and satisfactions. Secondly, we 
have briefly sketched the evolution of associations and or¬ 
ganisations, partly under pressure of social instincts, in a 
community sense, partly as products of intelligent self- 
interest seeking the private individual benefits of coopera¬ 
tive and corporate activity. 

We have also given brief acknowledgment to the operation 
of some central directive agency, adjusting the conflicting 
claims of the several urges, bringing other urges into fruit¬ 
ful cooperation, and aiming at some total economy or har¬ 
mony which shall give due satisfaction to all the demands 
of human nature in accordance with the rules of this cen¬ 
tral directive agency. In speaking of this directive agency 
we have sometimes used the term reason, sometimes intelli¬ 
gence, sometimes commonsense. Others would claim that 
these words confined the processes of control too much 
within the human mind, and would assign either to provi¬ 
dence, ‘ manifest destiny/ or other creative urge, the cosmic 
economy, the larger determination of human activities and 
satisfactions. 

Again, in the physical economy of the human body most 
important adjustments are due to reflexes or other instinc¬ 
tive operations that take place below the threshold of con¬ 
sciousness. From both these sources important contribu- 

45 


46 


STANDARDS OF WELFARE 


tions to human welfare may be made in furnishing the moral 
or material conditions for the emergence of values in the 
shape of desirable consciousness, or happiness. 

But our task here is directed to the part which man can 
take, as a person or a society, in the conscious guidance of 
his life for the furtherance of his welfare. The concept of 
welfare, as we have already recognised, involves adjustment, 
cooperation, harmony, of different satisfactions, or values 
within their several kinds, or groupings, and also of these 
kinds or groupings as contributory to a worthy and complete 
personality and society. 

Even the most careless or reckless of men practises some 
regulation of wants and satisfactions. The selfish hedonist 
will vary and limit his pleasures, in order to get the maxi¬ 
mum enjoyment. He must not give free rein to each appe¬ 
tite, must avoid discordant or conflicting activities, must 
shun satiety, in a word, must order and harmonise the only 
values that he recognises. If he becomes too lax in his 
economy, he loses and is lost. A careful policy is that of 
the athlete in the training of his body, or the intellectualist 
in the training of his mind, the gymnastics and music of the 
Athenian education. So too with the Pharisee, Puritan, or 
self-centred moralist, handling spiritual values and appear¬ 
ances for saintly prestige or the saving of his soul. All 
practise the art of adjusting diverse values within some 
special personal economy, following some conventional or 
thought out scheme, or else some inner light for guidance. 
The art, as practised by the hedonist, or even 1 the average 
sensual man’, in adjusting the claims of distinguishable 
physical urges, is properly an act of aesthetics. But when 
we enter the wider field of the adjustment of the respective 
claims and urges of physical, intellectual, and moral values, 
we enter ethics in its broader significance as the science and 
art of valuation. 

This brings us closer to the problem of standards and the 


STANDARDS OF WELFARE 


47 


criteria behind them. Standards of welfare which take into 
account all the varying interests, urges, and satisfactions of 
life, will stand out, for individuals and societies, in different 
degrees of definite consciousness. In origin and nature they 
cannot be regarded as purely rational or even conscious 
products. For, in the first place, our close adherence to the 
unity of body and mind obliges us to give due importance to 
the nervous system and the glandular activities that imple¬ 
ment the emotional and thinking processes. Considering 
that all healthy and efficient functioning of mind and mor¬ 
als are linked so vitally to health and efficiency of the bod¬ 
ily organism, we must shun the tendency of some intellectu- 
alists and moralists to treat the body as a merely passive in¬ 
strument, or conditioning environment, of the active and 
creative mind. The organic conception of mens sana in 
corpore sano still stands as the first principle of human wel¬ 
fare. The ‘standard of living’ in its ordinary acceptation 
is a distinctively material standard. It finds its justification 
in the truth so strongly enforced by Aristotle that we must 
first have a livelihood and then practise virtue. 

But there is a second ground for not insisting upon too 
rational an account of standards of welfare. Life is a fine 
art and in none of the fine arts does the true artist work al¬ 
ways along a closely preconceived plan. He must not know 
beforehand too clearly what he is after. Some idea, or if 
you like some working model, he must have in his mind, but 
he must retain freedom to play with his material, to try 
what he can do with it: there must remain room for experi¬ 
ment upon the one hand, inspiration on the other. Indeed, 
he cannot know exactly what he intends to do, unless he is 
a copyist and not an artist. For the artist is always crea¬ 
tive, and creation implies a novelty of material, situation, 
aspiration, that carries hazard and adventure, scope for a 
creative urge that must not be forced into clear conscious¬ 
ness. But the creative urge is in time and quantity but a 


48 


STANDARDS OF WELFARE 


small part of the work of every artist: study, preparatory 
processes, hard routine along intelligible prescribed lines, 
occupy most of his energies. So it is with life in general, 
more or less close routine and habit keep a man at a low level 
of consciousness in most of his doings. And yet one day 
does not exactly repeat another, even the routine of each 
day contains innumerable little variations that call for 
conscious reckoning and adjustment. Some careers abound 
in novel situations that call for skilled handling: all men are 
fairly frequently brought up against the need for sudden 
decisions and choices where reason gives no plain rule. Wel¬ 
fare, in a word, is not for any man a quite clear concep¬ 
tion or complete standard. He knows more or less what he 
wants, and seeks with more or less consistency of purpose 
to get it. Indeed, as regards what he wants, there is a high 
degree of fixity in what may be termed the lower levels. 
And it is here that we may best approach the study of stand¬ 
ards of welfare. In the main the values that normally rank 
lowest in clear consciousness (though highest if they fail) 
are those contained in, or served by, the things and pro¬ 
cesses that satisfy our ordinary daily needs, the routine of 
the life in the home, the street, the office, not only our mate¬ 
rial requirements but the ordinary intercourse in the family 
or office circle. If our life is to run satisfactorily, a large 
part of it must be reduced, for most of us, to low-conscious 
routine. Few of us want to live adventurously, as regards 
the advent of our meals and most other supplies of prime 
physical needs. For primitive man adventure, experiment, 
the conscious zest of life, must have been mainly concerned 
with just those matters which civilisation has reduced to 
fixed routines. Indeed, the whole economy of civilisation 
has been addressed to enlarging the standard of routine, so 
as to liberate a larger and larger amount of human energy 
for higher forms of free activity and satisfaction in the 
creative art of living. These higher values are not neces- 


STANDARDS OF WELFARE 


49 

sarily less physical in their activities and satisfactions. For 
the great majority of men in civilised communities, security 
of the prime essentials of physical life by routine organisa¬ 
tion does little more than liberate energy which they bestow 
on sport, travel, physical luxury, and adventure. But the 
point is that these activities, though largely impregnated 
with imitation and fashion, give scope for personal distinc¬ 
tion, achievement, and skill or risk, that figure in intense 
consciousness as elements of value. It is needless to labour 
the issue. It is self-evident that a perfectly standardised 
life would be destitute of interest, and that the rational 
economy of life consists in an harmonious adjustment of 
routine elements on lower planes of living, so that individuals 
and groups may consciously enjoy themselves in free un¬ 
standardised activities. This, of course, applies not only to 
physical activities and enjoyments. The term ‘standardisa¬ 
tion of the mind 7 is sometimes hurled as a reproach against 
forms of education, opinions, and valuations, imposed whole¬ 
sale upon, or accepted by, large numbers of persons who can¬ 
not be accredited with identity of innate mental make-up. 
But as on the material plane, so here on the mental there is 
quite evidently a right place for standardisation. There is a 
similarity, even an identity, of mental as of physical equip¬ 
ment in all specimens of homo sapiens. There will be quar¬ 
rels about the right constituents and proportions of the men¬ 
tal, as about the physical, diet of the normal child, but the 
same economy of welfare will enjoin the acceptance of com¬ 
mon standards on a reasonable supposition of identity of 
needs and methods of supply. Minor idiosyncrasies are 
rightly ignored, their sacrifice is justified by the liberty 
they purchase for the free play of larger personal divergences 
on higher levels. 

§ 2. A word may here be desirable about the use of the 
terms ‘higher 7 and ‘lower 7 values. ‘Higher 7 values, as we 
have been using the term, do not necessarily imply values 


50 


STANDARDS OF WELFARE 


that are intrinsically ‘more valuable’ and as such to be pre¬ 
ferred. Our use has been governed by two considerations. 
First, as the directive activity in variation and selection 
makes the human organism more complex and brings into 
play new powers of mind, both for practical work and re¬ 
flective, new desires, wants, interests, emerge upon the con¬ 
scious plane. The values attaching to these later, more re¬ 
fined phenomena are by general use designated higher. Sec¬ 
ondly, there is an ‘ethical’ sense in which they claim to be 
higher. The prime physical urges are either purely selfish, 
i.e., directed to the safety and satisfaction of the separate 
animal organism, or at most to the immediate interests of 
family or herd. 1 The subtler feelings and thoughts of civi¬ 
lised men are more largely and continuously social in the 
wider sense, being more intertwined with the interests of 
their fellow-men. Even the most selfish man in a modern 
community is compelled constantly to consider the feelings 
and views of others outside his immediate circle. This, in¬ 
deed, does not apply to all the ‘higher’ values, in their im¬ 
mediate implications. For the direct object of the economy 
of standardisation, as we saw, was to make a larger propor¬ 
tion of energy available for those activities in which one per¬ 
son differed from another, i.e., to the enlargement of individ¬ 
ual life. But as civilisation advances, so also in this ‘higher’ 
work, where personality is most conspicuous, the need of as¬ 
sociation and cooperation also grows. The relation of the 
most individual of artists, literary men, scientists, to fellow 
workers, and to an intelligent recipient and appreciative 
public, is of literally vital import. Individual and society, 
here as in every field, cooperate alike in the strengthening 
of individuality and of society. The higher the personality 
and the society, the larger the amount of common life, or 

1 This statement, however, needs qualification in respect of the pro- 
creative instinct which, though ‘selfish’ in its conscious urge and satis¬ 
faction, serves the wider and more distant interests of racial continuity. 


STANDARDS OF WELFARE 


51 


standardisation, it can and does absorb. This considera¬ 
tion will again intrude with urgency when we reach the 
analysis of distinctively economic processes. For the pres¬ 
ent search into the meaning and nature of general human 
welfare it must suffice to recognise that for most men, per¬ 
haps for all, the great bulk of activities are conducted at a 
low level of conscious interest, so as to furnish time, energy, 
and opportunity for the physical, intellectual, or moral 
claims of personality. We must not, however, be carried 
away by this useful distinction of higher and lower values 
into asserting that the higher are more important or ‘worth 
more’ in themselves. This is the snare of the intellectualist, 
as pedant or ‘high-brow/ of the moralist, as prig or Pharisee. 

Hitherto we have treated values and welfare in general 
terms as matters of agreement, rooted in the natural needs, 
desires, and interests of man, and coordinated and harmo¬ 
nised by reason, intelligence, common sense, or some subcon¬ 
scious cooperation. We have spoken of ethics as a science 
and art of valuation. But we have not found the assessor 
of values, the valuer, who lays down the criteria, makes the 
comparisons, adjusts the claims. Popular thinking is apt to 
brush aside these questions with the remark that values are 
matters of individual taste, and quot homines tot sententiae. 
But this is untrue. We know that there exists a substantial 
body of agreement as to the main constituents of welfare, 
and even as to the order of their valuation. Either people 
are made alike in their desires and interests, or they accept 
some common authority, law, tradition, fashion. No doubt 
the individual often plays a distinctive part, and there are 
those who perversely cultivate a personal pride in differing 
from the valuations of their neighbours. 

An intelligently ordered community will be one that so or¬ 
ders opportunities as to allow for eccentricities of personal 
valuations outside the general agreements and conventions. 
There is a sense in which private judgment remains supreme, 


52 


STANDARDS OF WELFARE 


and in which it is true that “the final guide in morals, when 
there is dispute, must be the conscience of each, the sense 
that each man has of right and wrong, of values. 1 ” 1 The same 
applies to aesthetic values. But if it be taken to mean that 
every man’s moral or aesthetic valuation is as good or as 
valid as any other man’s, not merely is it untrue, but it 
does not express the real mind of the individual valuer, 
who will often defer to the judgment of others whom he rec¬ 
ognises as better qualified than he to judge. Then granting 
that this deference itself is an act of private judgment, the 
point is that there are generally accepted canons of value, 
expressing in the plainest manner that men are alike in their 
physical and psychical make-up and environment and, there¬ 
fore, in their needs, desires, and interests. The reason why 
diversity seems to bulk so big is that the minor elements of 
unlikeness, of individuality in taste and aims and valuations, 
are more interesting and provoke more attention. The ex¬ 
ception is more interesting than the rule, and the rarer the 
exception the greater the interest. Here is the truth under¬ 
lying the oft-challenged Jeffersonian doctrine that “all men 
are born equal.” Taking the whole elaborate system of man, 
bodily and mental structure and functions, the individual 
differences are trivial. The differences in body, mind, char¬ 
acter, acquire interest, importance, value, because they are 
different. Probably it remains true that all men are equal 
in the sight of their Maker, the little divergences on which 
they pride themselves shrinking into insignificance. 

§ 3. In this real equality of men we find the basis of a 
valuation and a standard of welfare. But, in order to gain 
acceptance of the validity of such a standard, we have to face 
the question how far the actual desires of man can be taken 
as a right index of the desirable, i.e., that which he ought to 
desire and would, if he were fully alive to his real interests. 
The desired may not be identical with the desirable. 

1 Maciver, op. cit., p. 318. 


STANDARDS OF WELFARE 


53 


Here the question of the reliability and stability of per¬ 
sonality is raised. The judgment, tastes, desires of a man 
vary with age, physical condition, material and social en¬ 
vironment. Some personalities are steadier and tougher 
than others, less fluctuating in their valuations. But all of 
us know how the same objects or situations expand and 
shrink in our estimate. Night valuations differ from day 
valuations. Our attitude towards the future — our discount 
rate — is continually shifting. So is the strength of our re¬ 
gard for others, the social motive. How then, it may be 
asked, can we get any standard of current values for the 
individual? The answer is that these variations in the in¬ 
dividual are of limited extent and vary round a norm, just 
as does his temperature as registered by a clinical thermome¬ 
ter. Put our man into a normal state of quiescence, as a 
sane reasonable being, with “all his wits about him”, and he 
will register a fairly sane, stable standard of values. There 
will, of course, be different standards in accordance with 
differences of race, stock, physical environment and climate, 
town or country, economic and cultural status. It is clear 
that account must be taken of these divergences in any 
estimate of general welfare. But at their full surface signifi¬ 
cance? Not necessarily. For if it be admitted that within 
the capricious, fluctuating, temperamental Jones there is a 
normal Jones who registers True’, so in any estimate of 
basic group-welfare we may let these minor divergences can¬ 
cel out. This does not, however, mean that differences of 
stock are to be left out of account in considering the claim 
of eugenics to promote welfare, or that an identical standard 
of living is prescribed for townsman and countryman, men¬ 
tal and manual worker. But it signifies that, taking any so¬ 
cial group, we shall expect to find a general body of agree¬ 
ment upon the basic values, and a conception of social wel¬ 
fare in which these values form the chief factors. This will 
be consistent with a good deal of adaptation and compromise 


54 


STANDARDS OF WELFARE 


in adjustment to the needs of particular occupations and en¬ 
vironments within the group-area. 

§ 4. But even when we have eliminated from our standard 
those variations and eccentricities which do not express the 
normal character of the personality or group, are we yet in 
a position to assume such congruity between the ‘desired’ 
and the ‘desirable’ as will enable us to erect a valid standard 
of welfare? It may be urged that the actual standard of 
values operative normally in individuals’ lives often differs 
appreciably from their ‘ideals’. “Video meliora proboque, 
deteriora sequor.” Their ‘real will’ may incorporate a higher, 
more spiritual, more unselfish standard than their operative 
will. We may, indeed, agree that under normal circum¬ 
stances human beings, like other animals, are rightly guided 
and impelled by instinctive urges, or by reasonable choice, to 
follow their true interests, and that since their bodies and 
minds are closely similar in structure, this following of de¬ 
sires will, up to a certain level, testify to a general standard 
of human welfare. For physical survival of the individual 
and the species a high measure of correspondence between 
the current desires and ‘the desirable’ is maintained. The 
instinctive urges are directed to this end. They provide, as 
we have recognised, conditions not merely of survival but of 
evolution of higher structures. How far this natural equip¬ 
ment may carry towards social structure and conduct, is 
thus illustrated in a remarkable commentary upon ant- 
morality by Lafcadio Hearn. 1 

Only in a vague way can we conceive the character of ant-society 
and the nature of ant-morality; and to do even this we must try 
to imagine some yet impossible state of human society and human 
morals. Let us, then, imagine a world full of people incessantly 
and furiously working — all of whom seem to be women. No one 
of these women could be persuaded or deluded into taking a single 
atom of food more than is needful to maintain her strength; and 

1 Quoted by Carver, The Economy of Human Energy, p. 82. 


STANDARDS OF WELFARE 


55 


no one of them ever sleeps a second longer than is necessary to keep 
her nervous system in good working-order. And all of them are so 
peculiarly constituted that the least unnecessary indulgence would 
result in some derangement of function. . . . 

Most of us have been brought up in the belief that without some 
kind of religious creed — some hope of future reward or fear of future 
punishment — no civilisation could exist. We have been taught to 
think that in the absence of laws based upon moral ideas, and in 
the absence of an effective police to enforce such laws, nearly every 
body would seek only his or her personal advantage, to the disad¬ 
vantage of everybody else. The strong would then destroy the 
weak; pity and sympathy would disappear; and the whole social 
fabric would fall to pieces. . . . 

These teachings confess the existing imperfections of human 
nature; and they contain obvious truth. But those who first pro¬ 
claimed that truth, thousands and thousands of years ago, never 
imagined a form of social existence in which selfishness would be 
naturally impossible. It remained for irreligious Nature to furnish 
us with proof positive that there can exist a society in which the 
pleasure of active beneficence makes needless the sense of duty — 
a society in which instinctive morality can dispense with ethical 
codes of every kind — a society in which every member is born so 
absolutely unselfish, and so energetically good that moral training 
would signify, even for its youngest, neither more nor less than 
waste of precious time. To the evolutionist such facts necessarily 
suggest that the value of our moral idealism is but temporary; 
and that something better than virtue, better than kindness, better 
than self-denial — in the present human meaning of those terms — 
might under certain conditions eventually displace them. 

Whether Hearn is right in positing for human society, as 
interpreted by evolutionists, the same ideal of complete sub¬ 
jection of the individual to the race as is achieved in the ant 
society, is highly disputable. Free progressive individua¬ 
tion, if not the whole 'purpose’ of human evolution, is as¬ 
suredly an integral element, and few would accept as the 
ideal of a human society that absolute self-sacrifice at¬ 
tributed to the ants. But that nature has implanted and 
evolved in man also a substantial correspondence between 
his personal welfare, as expressed in his desires and aims, 


56 


STANDARDS OF WELFARE 


and the welfare of his society, present and future, may well 
be admitted. This correspondence is not, however, confined 
to a set of accurate instinctive urges, as with the ants. The 
adjustments requiring to be made between the claims of in¬ 
dividual ‘good’ and social ‘good’, in continually changing 
circumstances, bring up for man situations called ‘moral 
problems’ which are absent from the absolute dominion of 
society in the ant-economy. Absolute instinctive subjec¬ 
tion to a complete social regime eliminates all problems. 
For man there are conflicts, not merely between the individ¬ 
ual and society, or the race, but between the urge of im¬ 
mediate separate desires and that of his more reasonable self, 
seeking an economy of action which shall be at once better 
for him and better for society. 

§ 5. For primitive man living upon a low physical level of 
subsistence, nature must have imposed rules of conduct for 
the survival of the family or local group almost as absolute 
and automatic for the individual man as in the more highly 
developed ant-society. But when man got so far the better 
of his environment as to accumulate a growing surplus of 
time and energy beyond the expenditure for mere survival, 
and in so doing became a reasonable animal, there arose a 
crop of moral problems relating to the disposal of this sur¬ 
plus. Actuated by immediate urges of desire, he might 
squander in idleness or active dissipation the whole surplus. 
Or, with more intelligent economy, he might lay out a longer 
and fuller course of selfish enjoyment. Or, yielding to the 
social feelings, or to some half-conscious racial urge, he 
might get his own satisfaction largely by doing good to 
others and furthering the general welfare. 

The legend of the Fall of Man dramatised that new level 
in the evolutionary process when man broke away from the 
inexorable grip of Nature and insisted upon running an in¬ 
dividual career of his own. Still remaining a member of a 
race, for the maintenance of which he must make provision, 


STANDARDS OF WELFARE 


57 


and to whose service he owed allegiance, he claimed outside 
the requirements of this service the rights of a free man to 
create a personality for himself. The struggle between these 
two claims forms the material of unceasing conflict. Temp¬ 
tation, in its definitely moral meaning, is just the urge of 
the individual self to seize some immediate personal pleas¬ 
ure, or to lay out some purely selfish policy, to the depriva¬ 
tion or detriment of the fuller personal or group life to which 
we owe allegiance. 

Evil and error thrust themselves so forcibly upon our at¬ 
tention, make such urgent calls upon our practical energies, 
that we are liable to forget that they are exceptions to the 
general course of human history. Truth is far commoner 
than falsehood, honesty than dishonesty, or society could 
not possibly survive. There is a normal, fundamental sanity 
and race integrity in man which keep him loyal on the whole 
to his own best interests and to those of society. When, as 
sometimes happens, the actual urges and desires of men fail 
to keep correspondence with the requirements of a sound so¬ 
cial life, the race dies out. This has happened in quite mod¬ 
ern times, when white dominion suddenly thrust upon back¬ 
ward peoples has either introduced new destructive tastes 
and diseases, or has produced a sort of extreme passive re¬ 
sistance, a taedium vitae, that has led to a refusal of repro¬ 
duction. 

§ 6. But in the normal course of history we are justified in 
affirming of the basic activities of man that there is a high 
measure of congruity between his actual conduct and that 
conduct which is socially desirable, between his operative 
sense of his welfare and the general welfare. How far in¬ 
stinctive dispositions, how far some 'common sense’, how 
far reason, respectively, are instrumental in this harmony 
is a question that need not here further concern us. If we 
prefer, we may say that Nature, working through these 
channels, provides for human welfare. As for what we call 


58 


STANDARDS OF WELFARE 


the ‘lower values’, derived from those activities of body 
and mind which are common to all men, this harmony carries 
us a long way towards an accepted standard of welfare. As 
regards the ‘higher values’, more individual, more ‘conscious’, 
more interesting — though perhaps less intrinsically im¬ 
portant— the unique values of personality — how far can 
we bring them under a single concept of welfare? Is liberty, 
the provision of free access and opportunity for self-develop¬ 
ment and self-realisation, the last and only word? Do phi¬ 
losophy, religion, science, art, furnish no objective valua¬ 
tion — no practical ideals capable of acceptance by individ¬ 
uals with divergent tastes, limiting the waywardness of per¬ 
sonal tastes and desires, by imposing more or less authori¬ 
tative canons of the good, the true, the beautiful? 

In a time of widespread revolt, like this, when all author¬ 
ity and tradition are in question, it is important to face this 
problem of the objectivity of values. A considerable amount 
of agreement exists among hygienists, educationalists, mor¬ 
alists, on matters of physical, intellectual, and moral values. 
Though hygienists may differ on certain food values, they 
will generally agree upon certain rules, e.g., that a generous 
use of fruits and green vegetables is good, that for a sed¬ 
entary life little animal food is needed, that the regular or 
considerable use of alcohol is bad: they will agree upon the 
virtues of fresh air and exercise, and on many other points 
of physical regimen. Though there will remain many sub¬ 
jects of debate and conflict among moralists even within 
the diocese of the decalogue, the broad principles of private 
morality will be common doctrine, not only among thinkers 
and teachers, but among the body of the peoples in civilised 
countries, at any rate so far as prohibitions are concerned. 

Or take the education test. As education becomes a finer 
art, there is at once a larger body of agreement and of dis¬ 
agreement among its skilled practitioners. But the growing 
agreement is on fundamentals, both as regards subjects and 


STANDARDS OF WELFARE 


59 


treatment, and it is based upon a closer study of the normal 
needs and capabilities of children. Indeed, it is in the sphere 
of education that we best discover the composite character 
of a standard of welfare. For the education of any boy or 
girl follows three distinguishable aims. First comes the 
general culture, the body of knowledge and mental discipline 
commonly accepted as the equipment of every ‘educated' 
person, irrespective of special tastes or faculties. Next 
comes the knowledge and training for the special function 
or profession which the child may be expected to undertake. 
And, thirdly, due attention should be given to the strictly 
individual character, the training needed for the satisfaction 
of particular tastes and the moulding of the unique elements 
in personality. For education, as for the intellectual life at 
large, there will, of course, be dissenters even from the more 
fundamental values, and some of this dissent may carry the 
seeds of salutary reforms to be incorporated in new and 
better standards of the future. But at any given time there 
exist rules and standards of intellectual and moral, as of 
physical, well-being that express the general criteria of the 
best qualified judges. 

Just here we encounter and must qualify the provisionally 
accepted statement that the conscience of each person must 
be the ultimate judge of good and evil. When we are choos¬ 
ing for ourselves, this is the case. But in an ever increasing 
number of matters, we do not choose for ourselves. We defer 
to the judgment of others whom we recognise as better quali¬ 
fied than we are. It may, no doubt, be said that this defer¬ 
ence is itself in some measure an act of choice. But the 
point is that in most of the arts and practices that make up 
the conscious conduct of life, authority outside ourselves 
does intervene, and by persuasion, or even by coercion, shapes 
our conduct differently from what it would have been if left 
to our own private desire or judgment. In every organised 
society people are choosing not only for themselves how 


60 


STANDARDS OF WELFARE 


they will act, but for others, and often for others whom they 
seek to influence ‘for their good’ against their immediate in¬ 
clinations. Those in charge of children and other depend¬ 
ents, philanthropists, reformers, public administrators, ex¬ 
ercise the right to overrule the current desires and tastes of 
their charges in favour of some higher standards. 

Human nature in its actual manifestations may tend to 
vices or excesses in drink, gambling, dissipation of various 
sorts. In a sense, these may be accounted real values backed 
by strong natural urges; but social government condemns 
and curbs them, not merely as injurious to the welfare of oth¬ 
ers, but as errors of valuation in those who entertain these 
values. Authority declares for better sanitation than the 
people want, better instruction, better manners, less drink 
and drugs, better films, less gambling, and so forth. 

This can only be justified by assuming that the ‘best quali¬ 
fied 7 people have the right to impose standards of welfare, 
and that they can do so by virtue of some sort of consent or 
assent of the ‘government 7 . All sound government rests upon 
these two assumptions, first, that some persons are better 
qualified than others to determine values, secondly, that 
some recognition of this fact is generally acceded. 

There is this testimony to the validity of higher standards, 
that they have some appeal for those who cannot be said to 
understand or to desire them in any fully conscious way. 
The People will accept better standards than their own. All 
progress comes by assertion of initiative and leadership. 
Outstanding persons, or groups, thus impose a welfare that 
outstrips the current desires and approaches the desirable. 
This sublimation of gregariousness, working by admiration, 
imitation, and suggestion, is discoverable not merely among 
the unthinking masses thus brought up to a higher common 
level of life, but among the educated classes whose ‘tastes 7 
and ‘morals 7 are thus welded into some serviceable measure 
of conformity. 


STANDARDS OF WELFARE 


61 


But there are limits to this acceptance of higher standards. 
By mankind at large the claims made for the exponents of 
The higher life’, the prophets of truth, beauty, and goodness 
on their loftiest levels, have never been admitted. The 
scholar, the scientist, and the philosopher; the poet and the 
artist; the saint and the preacher have always been objects 
of suspicion, distaste, or ridicule, not merely among the ig¬ 
norant populace, but among ‘average sensual men’, who in 
the Anglo-Saxon world, at any rate, are men of affairs, fam¬ 
ily men, sportsmen, materialists with streaks of sentimental¬ 
ism and smatterings of purely conventional culture —the 
Philistines of Matthew Arnold’s shrewd analysis. It is easy 
for a cultured minority to take on superior airs and to return 
contempt for contempt. But it is more profitable before 
we give a final verdict to consider whether the Philistine 
may not have some real ground for his distrust of ‘high¬ 
brows’, artists, uplifters, and abstract thinkers. The reason¬ 
able claim for high culture, as arbiter of values, rests upon 
the wider survey of life as a whole which they possess, the 
larger range of actual experience. Whereas the uncultured 
man has no knowledge of the higher values, the votaries 
of these higher values remain in some contact with the lower 
levels of life. Philosophers and saints have got to dine, how¬ 
ever frugally: they cannot shed their animal natures. Thus 
they claim to be the only persons qualified by experience to 
compare the higher with the lower values, and to frame valid 
standards of human welfare. What is the Philistine’s 
counter-claim? Cultivators of the ‘higher values’, it is 
urged, are few, and the consciousness of rarity inflates their 
sense of their values. The secret urge of self-importance 
leads everybody to over-value any monopoly of knowledge 
or ability which he possesses. So the oligarchs of culture 
over-value their goods and disparage the lower life. Take, 
for instance, the statement of Professor Perry. “A fruitful 
theory of value will accept those stable and well marked uni- 


62 


STANDARDS OF WELFARE 


ties in which the values of life are already grouped. The 
great foci of interest are science, conscience, art, industry, 
state and church. ,, 1 What, it may be asked, about love, the 
family, friendship, health, sports, and amusements? Are 
not these “great foci of interest”? This criticism is coupled 
with another, which at first sight seems inconsistent with the 
first, viz., the allegation that the ‘higher values’ give way to 
the ‘lower values’ when they are put to a close test. The 
philosopher is more frightened and more incompetent in a 
‘real’ emergency than the ordinary man: in family life he 
is more irritable and exhibits less self-control than other 
men, is just as particular about his food and other ‘creature 
comforts’. This character is ascribed to all sorts of ‘intel- 
lectualists’, as well as to most artists and professional moral¬ 
ists. They do not carry their higher standards into daily 
life. Such behaviour, it is urged, betrays a sense of unreal¬ 
ity, a want of confidence in the higher life. Moreover, the 
pathetic admiration which many intellectualists display for 
success in the practical fields of politics or business enter¬ 
prise, the marked deference of the professor to the practi¬ 
tioner, seems to attest a protest of the baulked instincts that 
is of deep significance. 

§ 7. A further consideration may be put. We have seen 
that, as man rises from a primitive animal life, his conquests 
over environment have placed at his disposal an increasing 
surplus of energy above that needed for survival and mainte¬ 
nance of the species. As reason displaces instinct, this sur¬ 
plus is utilised more and more for individual needs. Civilisa¬ 
tion is conceived in terms of increasing individuation. May 
there not be a risk to the race in carrying this too far? It has 
sometimes been urged that high cerebration is physically 
detrimental to propagation. Whether this be true or not, 
history affords ample testimony to the failure of persons of 
reflective intelligence and sensitive nature to reproduce their 
1 General Theory of Value, p. 694. 


STANDARDS OF WELFARE 


63 


kind. The seclusion of monastic life, sex fastidiousness post¬ 
poning or inhibiting marriage, and in later days the deliber¬ 
ate limitation of the family most widely prevalent among 
the highly educated classes, have brought to extinction 
many of the most gifted strains. Eugenists deplore this 
fact, but seldom recognise that it may be nature’s protest in 
the interest of the species against excessive cultivation of the 
mind. May there not then be some racial protective value in 
the extrovert or Philistine distrust of high intellectual cul¬ 
ture and supersensitive morality? 

These reflections, however, need not, indeed cannot, lead 
us to reject the claim of educated persons to be better arbiters 
of value and better exponents of human welfare than those 
with little intellectual or spiritual cultivation. In spite of 
the popular resentment at intellectual and moral 'swank’, 
there is a growing acknowledgment alike by populace and 
Philistine of levels of thought and conduct somewhat higher 
than those in which they live. Most uneducated parents 
want some education for their children. As for moral stand¬ 
ards, most people want to do 'right’ most of the time, and 
accept and even profess ideals a little beyond their under¬ 
standing and practice. 

How far does this movement make for a common standard 
of humanity? Likeness in interests and values is increas¬ 
ing over wider areas of populations with the spread of the 
technical arts of civilisation. Our machine age not only 
assimilates mankind in external ways of living. It as¬ 
similates the minds of men. As Count Keyserling points out, 
"the old cultures perish in that in the new psychological dis¬ 
position of the human race, the transferable dominates the 
untransferable”, 1 that is to say, the generally 'intelligible’, 
accepting a common objective standard of appeal, displaces 
the traditional, a-logical, the older national and group cul¬ 
tures, religious, ethical, aesthetic, imposing a common civili- 
1 The World in the Making, p. 142. 


64 


STANDARDS OF WELFARE 


sation of which “the chauffeur intelligence” is the typical 
exponent. 

§ 8. Common humanity is visible in machinery, in politi¬ 
cal and economic government, ever more intricate and over 
wider areas, in hygiene, the substitution of universalism for 
nationalism in the arts and sciences, and a growing rational¬ 
ism in morals and institutional religion. All this is a natu¬ 
ral result of the rapid transferability of thought and know¬ 
ledge which marks our era. Human nature was always much 
the same in its fundamental structure and operation. World 
civilisation is engaged in undoing the racial and local diver¬ 
sities of living, and therefore of thought and feeling, due to 
particular environments. This standardisation, inevitable 
as it appears, strikes despair in the hearts of our more sensi¬ 
tive intellectuals. It seems to them the destruction of per¬ 
sonality. 1 But is this necessarily the case? For if the basic 
interests and needs of human nature are much the same, 
while the diversities, due to different material environ¬ 
ments, are shrinking with the standardisation of those en¬ 
vironments, there is a natural enlargement of what may 
rightly be termed the domain of common humanity. The ex¬ 
tension of this domain is not merely not hostile to personal¬ 
ity, it is a positive condition of growing personality upon the 

1 “We must not imagine that thoughtful Americans are unaware of 
the peril which is threatening mankind, but it is too much to expect 
them to sacrifice their mankind: for they give production priority over 
everything else. Having refused to save the individuality of the fac¬ 
tory worker, they shift their defence to other grounds. During the 
day the worker may be only a cog in the machine, they say: but in the 
evening he becomes a man once more. His leisure, his money, the 
very things which mass production puts at his disposal, these will re¬ 
store to him the manhood and intellectual independence of which his 
highly organised work has deprived him. This change in the centre 
of gravity of the individual marks an absolute revolution in the ideas 
on which society in Western Europe has been built up. Can it be pos¬ 
sible that the personality of the individual can recover itself in con¬ 
sumption after becoming so crippled and weakened in production?” — 
Siegfried, America Comes of Age, p. 349. 


STANDARDS OF WELFARE 


65 


higher levels. When we come closer to the discussion of the 
specifically economic character and effects of standardisa¬ 
tion, we shall recognise that even in the economic sphere it 
need not curtail and should expand the place of individual 
taste and activity in production and consumption. 1 Here in 
discussing the broader significance of the problem, the effect 
upon the general economy of values conceived as “desirable 
consciousness” or welfare, we can detect no real hostility be¬ 
tween expanding uniformity and expanding diversity, where 
it is manifest that the former is a prime condition of the 
latter. If mankind in general is ever to share on reasonable 
terms of equality the opportunities of free personality in its 
higher reaches hitherto confined to the few, this is only at¬ 
tainable by putting an increasing portion of life in its lower 
levels upon a basis of secure uniformity. The athlete does 
not lose the zest of achievement but gains by reducing the 
elementary processes of his activity to a strict routine. So it 
is with every skilled and interesting function: by converting 
interested skill at the bottom to automatism, we gain on the 
higher levels. Only in this way can personality be enlarged 
and raised to finer expressions. 

§ 9. So, accepting the general standards of the society in 
which we live, we may day out’ for ourselves personal stand¬ 
ards of life in terms of career or character, according as we 
are extroverts or introverts. Or we may not day out’ at all, 
but Take life as it comes’, in the spirit of opportunists. Most 
civilised men blend these attitudes towards life, laying out 
plans, but not too precise or too far ahead, with some con¬ 
cern for character and conduct but little for their ‘souls’, 
and not setting themselves closely to any ‘standards’, be¬ 
cause they perceive or feel that ‘standards’ do not really 
stand, but require continual readjustment. 

What is sometimes condemned as opportunism or lack of 
principle is really a not quite intelligent but none the less a 
i Cf. Part IV, chap. 5. 


66 


STANDARDS OF WELFARE 


sound grasp of the art of life. It is the business of science to 
erect standards, of art to use them for departure platforms. 
For the artist of life, life is an adventure, but not a blind 
adventure. In one respect his art differs from other fine arts. 
The material they handle is stable, however refractory. 
Their adventure is the discovery of what they want to do 
with it when they are doing, when the creative urge is actu¬ 
ally at work. The more they know of the materials and con¬ 
ditions of their work, the science with its standards in the 
background of their mind, the better for their art. They 
may use their science consciously in planning out their 
work, but in the execution, it necessarily stands aside. For 
science cannot directly obtrude upon creation. Now the art¬ 
ist in life, whether a personality dealing with the circum¬ 
stances of his career, a politician handling some problem of 
state, a group or nation groping after some new way of life, 
is also struggling to express the creative impulse, the direc¬ 
tive activity within, by moulding the situation in which he 
finds himself. Moreover, most of his material is closer to 
him than the material handled by other artists. For the 
situation which he handles is in large measure himself, his 
own nature, his passions and desires, his own aptitudes and 
capabilities, the very make-up of his personality. The social 
and physical environment which enters into the situation he 
handles is not more to be regarded as the material of his 
artistry than are these factors of his personal make-up. 
Such situations are never static, they are changing all the 
time. Not all the ordered knowledge of his environment, or 
the records of his own and others experience, can give him 
full confidence in handling any of his human problems. For 
history never repeats itself exactly, nor is human nature an 
entirely static stuff. We must, therefore, beware of claiming 
more for the finest and most disinterested social science than 
the changing conditions of life permit. In other words, social 
science, in setting its serviceable but provisional standards 


STANDARDS OF WELFARE 


67 


for the conduct of individuals or societies, is compelled to 
frame its daws’ upon two assumptions neither of which is al¬ 
together true. The first is that the ‘novel’ in event, situa¬ 
tion, and character may be ignored: the second is that human 
nature is uniform. It is not, of course, that scientists dispute 
the existence of novelty and diversity, but that, as scientists, 
they are incapable of dealing with these elements. It is the 
artist who handles the novel and the particular. For the 
scientist as such the creative urge and process do not exist. 
But the artist cannot dispense with science if, as his func¬ 
tion implies, he is to enter as an active agent into the crea¬ 
tive process. In order to mould the future, you must under¬ 
stand the past; in order to handle the particular case, you 
must know how far it conforms to and diverges from the 
general. Moreover, as we have recognised, though the novel 
and the exceptional play a striking part in the human drama, 
the stable and the normal are larger and more fundamental 
factors. While, therefore, human life and institutions are 
continually changing in their higher levels, and new activi¬ 
ties, interests, and values emerging, the deep-rooted urges 
and satisfactions based on organic structure remain virtu¬ 
ally unchanged. Civilisation may and does repress some of 
the cruder expressions of these urges, or ‘sublimates’ them, 
and many of the dangers and defects of civilisation are due 
to lack of scientific guidance and of artistic skill in making 
these adjustments. 

Concerned, therefore, as we are with standards of human 
welfare, we shall not be deterred by those who would insist 
that individual welfare cannot be brought under standards. 
Rather shall we insist upon the similarity, solidity, and con¬ 
tinuity of the factors that constitute welfare, whether of the 
individual or the group. The finest flowers of personality 
grow from a common soil and in a common climate. Stand¬ 
ardised associations, economic, political, spiritual, ‘social’, 
and others, need not repress personality but can furnish the 


68 


STANDARDS OF WELFARE 


liberty and opportunity for the evocation and nourishment 
of individual genius and efficiency. Civilisation, indeed, is 
engaged in a two-fold and at first sight contradictory work. 
On the one hand, it is engaged in eliminating risks, providing 
physical and moral security, and evolving safe standards. 
On the other hand, it is engaged in launching mankind on 
higher levels of adventure and in wider fields. The limits 
both of security and of adventure are constantly shifting, 
but to some extent in planned and calculable ways. The ob¬ 
ject always is to reconcile and in a degree to harmonise se¬ 
curity and progress. The reconciliation and the harmony 
can never be complete. Even absolute physical security is 
not to be desired. The search for it breeds hypochondria. 
So with intellectual and moral security, the straining after 
a complete system of thought or an absolute rule of life pro¬ 
duces spiritual hypochondria. Human welfare, therefore, 
will involve a continuous process of changing the standards. 
As in all arts, the ‘purpose’ or ‘objective’ is not a clearly pre¬ 
conceived one, but is disclosed and even formed in the ‘do¬ 
ing’. New standards are thus discovered, though there is 
reason (thoughtful informed economy) in the process of dis¬ 
covery. 

The distinction drawn here between those elements of wel¬ 
fare which are common to mankind and those which are 
strictly personal will be found of importance as we proceed 
to develop the relations of economic to human values. For 
the organised economic society is mainly concerned with the 
common elements of welfare and only indirectly, though not 
unimportantly, with strictly personal values. 

In estimating the actual conduct of a person from the 
standpoint of the desirable, we discover three types of error, 
the seizure of the reins of conduct by some single dominant 
desire in defiance of the organic harmony of the whole na¬ 
ture, the taking of short-range estimates of what is worth 
while, and the preference of the selfish to the social urges in 


STANDARDS OF WELFARE 


69 


the play of conduct. These errors are often fused when some 
strong animal passion stampedes the personality into uncon¬ 
sidered action. But the distinctions are worth bearing in 
mind, for they have application in the sphere of group or 
community life. History is rife with instances where fear, 
hubris, or hate, rushes nations into wasteful or destructive 
ways. So likewise the narrow selfishness of small group-life 
everywhere cramps the progress of humanity, the preference 
of our city to our country, our empire to the world, in mat¬ 
ters where the wider is the truer economy. Still more damag¬ 
ing is the pressure of present group interests and desires to 
the detriment of posterity, in the utilisation of the material 
and moral resources at their disposal. 

The art of human welfare in its full relation to the popula¬ 
tion of the earth and the civilisation of the future is only 
beginning to dawn upon the modern mind as the chief duty 
of man. 


CHAPTER V 

THE HIERARCHY OF VALUES 

§ 1. I have spoken of higher and lower values, higher and 
lower levels of values. But values are not wholly inde¬ 
pendent things; the interests they express or the desirable 
consciousness of which they consist are more or less har¬ 
monious groups. Some values will enter into more than one 
grouping. Take the desirable life, or welfare, of the athlete, 
the business man, and the scholar. Bodily vigour will and 
should figure in all three, but as a conscious aim it will usu¬ 
ally bulk bigger in the athlete. ‘Knowledge of the world’ and 
tact in handling men are more important elements in the 
standard of the business man than in that of the athlete or 
scholar. The scholar’s welfare will contain far more of the 
strictly intellectual goods. 

This signifies that a value, or the4nterest it serves, does 
not stand alone and cannot be rated as a separate entity. As 
value, it affects and is affected by the other values in its 
group or standard. The attempt to separate values from 
their companions in a group involves nothing less than a 
breaking up of the unity of personality. Human activities, 
their interests and values, are indeed grouped on two dis¬ 
tinguishable principles. The first is the strictly organic har¬ 
mony by which body and mind as wholes, and as a whole, 
work together. Here are the groupings of values which at¬ 
tend the activities of the mens sana in corpore sano. These 
groupings are ‘natural’ in the sense that they are rooted in 
the organic structure or make-up of man, apart from his 
personal choice and direction. The second principle of value 

70 


THE HIERARCHY OF VALUES 


71 


grouping comes from human purpose, the way of life chosen 
by, or put upon, a person which leads him to arrangements 
of activities in which the strictly organic groupings figure 
as conditions to which his planned conduct must more 
or less conform. Reason and will operate in this second 
harmony or grouping towards some modification of the or¬ 
ganic life as such. In any attempt, therefore, to assess 
values, we must approach them as operative complexes. 

It is an undue pressure of the scientific claim, of the ana¬ 
lytic method, that induces social students to the view that 
two values can be taken out of their composite and compared 
with one another. This error is illustrated in Mr. Maciver’s 
treatment. 

“Every interest is in the end a practical interest, deter¬ 
mined, that is, by a sense of value. Further, all values are 
in practice comparable. No abstract measuring rod can be 
found, but no person can act at all unless he can choose; the 
necessities of life and character are necessities of choice. 
When community differentiates, when social claims are no 
longer simple but manifold, the necessity of choice is deep¬ 
ened. The widened claim of sociality is an intenser demand 
on individuality. But the whole social situation implies that 
values are comparable, that is, are forms of a single value.” 1 

Now I have two quarrels with this statement. Undoubt¬ 
edly choice implies comparison. But the comparison, as I 
see it, is between one organic group of values and another. 
In a later chapter I shall illustrate this claim by dealing 
with economic standards of comfort. But every choice in 
life is a choice of life, of one life as against another, one or¬ 
ganic complex of values as against another. Secondly, these 
complexes of values are not to be regarded as forms of a 
single value, i.e., to be estimated as purely quantitative dif¬ 
ferences. One way of living, i.e., one group of values, is pre¬ 
ferred to another as better, not bigger. Preference is for a 
1 Community, p. 313, 


72 


THE HIERARCHY OF VALUES 


difference in kind, not in quantity. There is not a single 
value but various value-groupings. Civilisation in a peo¬ 
ple, culture in an individual, consists in substituting higher 
for lower standards of values. The same elements (values) 
may appear in a higher as in a lower grouping, but their 
different proportions will make a different combination, the 
higher combination showing novel qualities. This, of course, 
is the now familiar doctrine of creative or emergent evolu¬ 
tion, more plainly discernible in human life than in any 
other part of Nature, because in human life the directive ac¬ 
tivity that is creative shows itself more and more in conscious 
nisus. The higher unities, or wholes, which appear in the in¬ 
organic world as more complex chemical structures with new 
properties, or, in the merely organic world, as higher struc¬ 
tures with new functions, appear in human history as new 
and more complex organisations of activities, interests, 
values. 

If we are, then, to envisage welfare in a hierarchy of 
values, standing not separately but in organic compositions, 
how far can we treat this hierarchy as objectively valid for 
all sorts of men or of societies? 

It is easy to obtain assent to the proposition that the in¬ 
tellectual and the spiritual life are ‘higher 7 than the life 
of sensations, in the double sense that in these higher lives 
the physical will play a subordinate part, and that the 
‘higher 7 complex will be more delicate in structure and subtler 
in the consciousness it carries. The ‘higher 7 life, whether of 
intellect or ‘spirit 7 , is an enlargement or enrichment of ‘self 7 
involving the whole personality. Of the lower life, of the 
‘materialist 7 , the ‘sportsman 7 , the extrovert in general, we 
say that he is not living fully, because there are whole tracts 
of life unknown to him. Moreover, the ‘self 7 he cultivates is 
a narrower self. Such sociality as he enjoys consists of 
merely superficial contacts and cooperations. The life of in¬ 
tellect, or spirit, takes us outside of ourselves. It brings us 


THE HIERARCHY OF VALUES 


73 


into intimate relations with the inner life of others, engages 
us in a communion of searchers after knowledge, scholars, 
artists, saints. We have seen how difficult it is to decide be¬ 
tween the claims of the Good, the True, and the Beautiful, 
in the composition of welfare, or the desirable life, and that 
language attests a common character in this appeal. Har¬ 
mony, sympathy, consistency, ideals of the several interests, 
differ little in their significance. We need them all for a de¬ 
sirable life. But it may be urged that the force of their ap¬ 
peal, the human interest they evoke, must in all cases appear 
in some height or intensity of emotion. Sympathy with an¬ 
other’s joy or sorrow, the glow of feeling for a ‘noble’ deed, 
the rapture which great music can give, the enchantment 
that accompanies some new large vision in the world of 
thought — how can we appraise these peaks of conscious¬ 
ness, except in terms of emotional value. But even so some 
will rate one of these emotions higher than another. We still 
have the preference of the cultured aesthete, the philosopher, 
the saint, to reckon with. No agreed decision is, perhaps, 
possible as to the hierarchy of values. But I shall hazard a 
criterion which is ultimately based upon the ‘racial’ or ‘spe¬ 
cific’ trend of organic evolution. If Nature makes so much 
nisus (directive activity) towards the preservation and 
growth of a species, and if social cooperation plays the dis¬ 
tinctive part it seems to do in human survival, then it may be 
argued that the highest value attaches to the conduct and the 
emotions which sustain society in the elaborate structure it 
has attained, and assist it to further useful modes of coopera¬ 
tion. This will seem to furnish a criterion for Human Wel¬ 
fare in its higher reaches by stressing the feelings, beliefs, in¬ 
terests, activities, and institutions, which bring men into 
closer, conscious, willing cooperation for as many different 
sorts of work as possible, or, put otherwise, which enrich the 
human personality through the largest measure of sociality. 

This conclusion should, I think, satisfy most of those who 


74 


THE HIERARCHY OF VALUES 


seek to regulate the economic life of a society by the applica¬ 
tion of the concept of functional society. For, rightly or¬ 
dered, such a society would be one whose service would be 
perfect freedom, the will of the members cooperant towards 
the well-working of the whole. Whether this well-working 
finds its Value’ in any state of happiness or consciously de¬ 
sirable state, or simply in well-working on its own account, 
will be a matter of personal preference among philosophers 
in defining the ‘purpose’ or ‘end’ of human activities. 


PART II 


ETHICS IN THE EVOLUTION OF 
ECONOMIC SCIENCE 



CHAPTER T 


THE PLACE OF INDUSTRY IN 
THE LIFE PROCESS 

§ 1. Endeavouring to get as clear a meaning as we can for 
human values and the welfare they constitute, we have come 
to associate them with the two related concepts^ Personality 
and Community. Whether the sole end or purpose of the 
social activities and institutions that form Community is the 
growth and enrichment of Personality, or whether Commu¬ 
nity may also be regarded as a collective conscious being with 
values of its own, is a question to which we are not here 
bound to give an answer. For whether all welfare is ulti¬ 
mately reducible to desirable individual consciousness or 
not, it is certain that the enlargement of such individual 
welfare is dependent upon, and in chief part derived from, 
the development of Community. When, therefore, we enter 
upon our task of relating economic values to human values, 
as part to whole, we are immediately confronted with the 
necessity of giving an account of the place which economic 
activities and institutions occupy in the all-embracing sphere 
of community. For, whatever meaning be given to economic 
values and welfare, society and its institutions enter in as 
determinants and agents. Man as a completely isolated 
economic being is not conceivable. Crusoe was not such a 
being. He was the inheritor of countless generations of so¬ 
cial economic culture. How far primitive man was gregari¬ 
ous in all environments is an interesting theme of contro¬ 
versy among anthropologists. But there can be no reason¬ 
able ground for denying to the human family the name of 

77 



78 


INDUSTRY IN THE LIFE PROCESS 


social institution, and it certainly contained the nucleus of 
an economic organisation. 

I do not propose to discuss at any length the doctrine of 
the economic determination of all social institutions, as pro¬ 
fessed by strict adherents of the Marxian school and by some 
economists outside that school. For what plausibility at¬ 
taches to that doctrine rests upon an extension of the mean¬ 
ing of the term economic to cover the whole field of biologi¬ 
cal activities. If you premise that all forms of the physical 
and psychical activities of man consume energy that must 
be replaced by food, since food-getting is an economic pro¬ 
cess you may claim positive proof of the economic deter¬ 
mination of history. But all you have really proved is that 
food is a necessity to human life, and that all other activities 
and institutions must be consistent with the activities and 
institutions of food-getting. You do not prove, either that 
food-getting is the only necessary activity, or that its ur¬ 
gency is such as to mould all other activities to its need. 
For biological survival and growth there are other activities 
related to sex, care of offspring, the acquisition and exercise 
of skill and knowledge, group protection, etc., which lie out¬ 
side any accepted meaning of the term economic. Food, 
shelter, and other products of ‘economic’ activities are neces¬ 
sary adjuncts to those other activities, but these latter have 
their separate origins in the inherited structure and character 
of man. Thus only by stretching ‘economic’ so as to make 
it coterminous with biological can an appearance of validity 
be given to ‘the economic determination of history’. Even 
so this school of determinists would have to reckon with 
sociologists, like Professor Hobhouse and many others, who 
do not admit the exclusive claims of biological factors in the 
determination of human values, but find an evolution of 
mind which in its higher levels is liberated from the sur¬ 
vival economy. 

But this rejection of the extreme claims of economic de- 


INDUSTRY IN THE LIFE PROCESS 


79 


terminism by no means leads us to refuse recognition to the 
large, often predominant part played by distinctively eco¬ 
nomic motives and activities in shaping all other human 
activities, even those that seem at first sight most remote 
from economic influences. The famous formula of Le Play 
— Place, Work, Family (or Folk) — derived from prolonged 
study of actual situations, furnishes a far more serviceable 
introduction to our enquiry. That men, as individuals and 
as families, are affected in their ways of living and of think¬ 
ing by the kind of work they have to do, and that the kind 
of work is, at any rate in primitive society, determined 
mainly by the soil, climate, flora, and fauna of the country 
where they live, are undeniable propositions. 

Le Play’s formula, with the modern developments it has 
received from the works of Professor Geddes and Mr. Bran¬ 
ford, goes a long way towards establishing the claims of eco¬ 
nomic activity as the key to the natural history of human 
society. For if it be maintained that the Le Play formula 
places on a basis of equality the geographical, biological, 
and economic factors, it is the third of these, the work, that 
stands out as the active force. This appears quite clearly if 
for this simple triad we substitute the more formidable terms 
Environment, Function, Organism. It is the activity of the 
organism in the given environment that counts for history. 
True the mode of activity may be said to be determined by 
the relation of organism to environment, and, pursuing the 
matter further, the structure of the organism may be con¬ 
sidered in large measure the product of the environment 
through natural selection. But though, thus regarded, the 
three may be treated as equal inter-agents, Place making 
Folk and in turn modified by Work, Folk made by Work and 
making Work to meet its wants, Work moulding character 
and ways of life, it is the latter process that must claim 
preeminence in the history of man. Place and Family (or 
Folk) rank more as conditions, not inert but determinant 


80 


INDUSTRY IN THE LIFE PROCESS 


conditions, of the active element, the Work which expresses 
whatever purpose or direction is found in history. 1 

The sociological studies of man in his actual environment 
and occupation give a just prominence, or even predominance, 
to the economic function as determinant of domestic and 
group habits and institutions. For, though other urges, or 
instinctive dispositions, operate upon conduct sometimes in¬ 
dependent of, sometimes hostile to, the economic drive, the 
latter will always make its steady pressure felt upon what 
originate as non-economic activities, often, as in politics, 
subjugating them to its own ends. This interaction of the 
three factors is not, however, a complete account of life in 
its prime constituents, if ‘work’ be taken merely as ‘the eco¬ 
nomic factor’. For man influences his environment by the 
whole of his physical activities, not by ‘work’ alone, and 
the extent and variety of this influence is not adequately 
represented by any mere adaptation of the Le Play formula. 
“Each kind of organic creature selects and uses in different 
degrees the different elements and situations of the com¬ 
mon world of them all and thus makes an environment for 
itself. For environment is not simply the external world, 
but the external world as it is related to life.” 2 All the ac¬ 
tivities of life are thus represented in the moulding of what 
Le Play terms ‘place’ to the purposes of an organic environ¬ 
ment. The wider environment thus made by man is itself 
unity in diversity. “Each life is environed at once as an or¬ 
ganic body, by an outer physical medium of the organism, 
by other lives likewise incarnated, and by the social order 
which together they create.” 3 In most primitive societies, 

1 This truth is obscured by the setting sometimes made by the 
modern Le Play school. For example, Geddes and Branford write, 
“The observer maps the facts of these sequences — Grass-Sheep- 
Shepherd; Forest-Game-Hunter; Arable-Corn-Peasant; and so on 
for each of the occupational types.” — The Coming Polity, p. 183. 
But ‘Work’ is not properly represented by Sheep, Game, Corn, but bv 
‘Shepherding/ ‘Hunting/ ‘Tilling.’ 

2 Maciver, op cit., p. 376. 3 Maciver, op cit., p. 376. 


INDUSTRY IN THE LIFE PROCESS 


81 


though economic work often occupies a smaller part of a 
man’s time and energy than in civilised societies, its mould 
and influence upon his ways of life, thought, and feeling is 
most clearly discernible. It is reflected, not only in family 
and class structure and the rudimentary politics, but in the 
blends of art, magic, and religion, the rituals and the tabus 
through which the dawning imagination and the sense of 
wonder find expression. It is not among primitive men 
alone that religion is directed towards conciliating the un¬ 
seen Powers which rule the weather and the generative pro¬ 
cesses. All through history to the present day those who 
live and work in close direct contact with Nature are simi¬ 
larly affected in their mentality: their work is the direct 
and dominant element in moulding family, class, or politi¬ 
cal group, and in determining the rudimentary conceptions 
and practices of art, science, morals, and religion. No longer 
living in close, local isolation, their customary ways of life 
and thought are affected by outside influences, but remain 
au fond the naive expressions of biological and mainly eco¬ 
nomic needs. Though the occupations in the quest of food 
under primitive conditions offer the simplest examples of the 
influence of definitely economic work upon the general life 
of man and community, a similar analysis can be made of 
the dominance of economic activities and motives upon the 
structure and working of social institutions in more de¬ 
veloped and strictly civilised conditions. To this analysis 
Mr. Veblen has directed some of his keenest and most il¬ 
luminating thought. For economic determination is trace¬ 
able not only in particular instances where some economic 
motive or idea is woven advantageously into a strand of 
policy or a religious propaganda. He finds in the tensions 
of thought and feeling, natural or inherent in the prevail¬ 
ing mode of work, the keynote to the whole mentality of 
the society. Among rural communities Mr. Veblen dis¬ 
tinguishes the more settled agricultural peoples from the 


82 INDUSTRY IN THE LIFE PROCESS 


more predatory pastoral peoples. In the former he finds 
“little coercive authority, few and slight class distinctions 
involving superiority and inferiority; property rights are 
few, slight, and unstable; relationship is apt to be counted 
in the female line. In such a culture the cosmological lore 
is likely to offer explanations of the scheme of things in 
terms of generation or gemination and growth. The laws 
of nature bear the character of an habitual behaviour of 
things, rather than that of an authoritative code of ordi¬ 
nances imposed by an overruling providence. The theology 
is likely to be polytheistic in an extreme degree and in an 
extremely loose sense of the term, embodying relatively little 
of the suzerainty of God.” “The matters of interest dealt 
with in the cosmological theories are chiefly matters of the 
livelihood of the people, the growth and care of the crops, 
and the promotion of industrial ways and means.” 1 The 
predatory pastoral peoples on the other hand “will adopt 
male deities in the main, and will impute to them a coercive, 
imperious, arbitrary animus and a degree of princely dig¬ 
nity. They will also tend strongly to a monotheistic, pa¬ 
triarchal scheme of divine government; to explain things in 
terms of creative fiat; and to a belief in the control of the 
natural universe by rulers imposed by divine ordinances. 
The matters of prime consequence in this theology are 
matters of the servile relation of man to God, rather than 
the details of a quest for livelihood.” 2 

Not less distinctive are the impressions made upon the 
general body of thought and institutions by the growth of 
town life and of the handicrafts attached thereto. The pri¬ 
macy in processes of production thus passes from the genera¬ 
tive and germinating activities of Nature to the personal skill 
and industry of individual man in handling inert material. 

“The technological range of habituation progressively 

1 The Place of Science in Modern Civilisation, p. 47. 

2 Idem, p. 48. 


INDUSTRY IN THE LIFE PROCESS 


83 


counts for more in the cultural complex, and the discrepancy 
between the technological discipline and the discipline of 
law and order under the institutions then in force grows 
progressively less. The institutions of law and order take 
on a more impersonal, less coercive character. Differential 
dignity and invidious discriminations between classes gradu¬ 
ally lose force.” 1 

As trade, or a more regular and extensive trade, marched 
with this technique of town industry, habits of appraisal and 
bargaining went to develop initiative and cunning, and 
liberty of contract became a dominant conception. Both on 
the technological and on the commercial sides there is a 
break-up of the old moulds of custom, and novelty and enter¬ 
prise give a new dignity and interest to the economic life. 

But agriculture continued to be the chief occupation and 
the era of handicrafts was an era of small local markets. It 
remained for the age of machinery and power, the Industrial 
Revolution, to make a rapid and a nearly world-wide trans¬ 
formation in popular thought, feelings, and institutions. Re¬ 
garded from the economic starting point, it was the imper¬ 
sonality of the machine industry that counted most, to¬ 
gether with the immense impulse to all the physical sciences 
that could bring grist to the mill. The initiative and inter¬ 
est of work in machine industry and its attendant trades 
were concentrated in the head and hands of a few great 
entrepreneurs and managers, and accuracy of quantitative 
measurements took over the former functions of manual 
skill. Organisation and standardisation for large markets 
have become more and more the mots d’ordre, involving for 
the ordinary man a thinking in terms of regular process 
rather than of workmanlike efficiency. His life, as worker, 
is narrowed to a routine; as consumer, his formal freedom is 
greatly enlarged in the number and variety of goods avail¬ 
able for his purchase, but the levelling influence of mass con- 
1 Idem, p. 49. 


84 


INDUSTRY IN THE LIFE PROCESS 


tiguity, itself the concomitant of mass production, stamps 
upon him the equality of taste and the common standard of 
living so clearly discernible in great city life. 

§ 2. Thus in various ways the new technology is trans¬ 
forming thought, feeling, and valuations. Though the num¬ 
ber of those closely and consciously addicted to scientific 
thinking and researches comparatively few, the sense of 
regularity of process and of fixed causation, a new deter¬ 
minism, has spread widely among the common people, se¬ 
cretly undermining the ideas and sentiments of chance and 
Providence, and claiming for the whole of life a mechanical 
intelligibility. There are, of course, counter-currents and 
by-currents, signs of a new freedom of thought turning upon 
the mechanisation of the mind with a challenge, and develop¬ 
ing a science of psychology to aid the cause of liberty. But, 
in general, the economic forces during the past century have 
manifested a quite undeniable influence on human mentality 
as applied to politics, art, literature, morals, religion, and 
science itself. Of religion it has been well said that “it is 
only those whose livelihood depends on that which is inex¬ 
plicable to them — the weather, for instance, in the case of 
sailors and peasants — who hold fast to a traditional faith, 
while factory masses increasingly fall away from it.” 1 

§ 3. But before developing this theme it is necessary to lay 
down as clearly as circumstances admit the meaning we pro¬ 
pose to give to ‘economic’, as applied on the one hand to ac¬ 
tivities and institutions, on the other to the organised body 
of thought dealing with this subject matter. This is no 
easy task. For if we take for our guide the terms ‘economy’ 
and ‘value’ in their broadest signification, bringing into our 
purview all human efforts and satisfactions, we identify 
economics with the whole field of the social arts and sciences. 
If, on the other hand, we adopt the ordinary ‘business’ stand¬ 
point, accepted by many economists, of confining economic 
1 Keyserling, The World in the Making, p. 131. 


INDUSTRY IN THE LIFE PROCESS 


85 


processes and products to the making, carrying, selling, of 
material goods in markets, we get into other difficulties. No 
small part of our trouble is attributable to the fact that 
only in quite recent times did economic activities separate 
themselves sufficiently from other human activities as to 
present themselves as a subject for special consideration. 
The processes which we now regard as definitely economic, 
the production and disposal of food, clothing, shelter, furni¬ 
ture, tools, and other material objects of desire embodying 
human work, were mostly performed within the ‘commu¬ 
nism’ of the family, or sometimes of the larger local group, 
and might be regarded indifferently as belonging to the 
‘polity’ or the ‘economy’ of the group, or perhaps better as 
an integral part of the biological struggle for individual 
and group survival. Even when town life with its early 
division and specialisation of labour, its markets and other 
mechanism of commerce, came into being, these trades were 
closely linked up with the broader polity of the city or the 
state. Not only w r ere they subject to political controls, but 
as branches of moral conduct they fell under the even closer 
supervision of ecclesiastical authority. These controls, ex¬ 
ercised in most countries up to comparatively recent times, 
prevented what we now regard as an economic system, re¬ 
quiring for its understanding and guidance a specific science 
and art, from coming into separate existence. The thinking 
done by statesmen and other students of public affairs in¬ 
cluded ‘economics’ in their wider survey. 


CHAPTER II 


THE EMERGENCE OF ECONOMICS 
AS A SCIENCE 

I 

§ 1. A striking testimony to the early merging of eco¬ 
nomics with the general activities of men and communities 
is afforded by the current terminology of economic science. 
A number of its most important terms present a shrinkage 
from an earlier, wider connotation. The term ‘wealth’ had 
a larger human significance in the sixteenth century in 
the Prayer for the King in the Prayer-book containing the 
words, “Grant him in health and wealth long to live”. 
‘Goods’ is a materialistic narrowing of a distinctively ethical 
word, still surviving in ‘good life’, and more broadly human 
in ‘a good time’. Though property still retains a larger 
philosophical significance, juristic economics has firmly 
stamped it with its modern characteristic meaning. But 
most significant of all is the economic seizure and possession 
of the pivotal term ‘value’. “The word value,” writes J. S. 
Mill, “when used without adjunct, always means in Politi¬ 
cal Economy, value in exchange.” Such shrinkages of mean¬ 
ing are associated with the severance of economic activities 
from the general complex of activities in the Family, the 
Guild, the Commune, the City. It is natural that this spe¬ 
cialisation of language should accompany the process of 
gathering and assembling a number of partial fragmentary 
studies into an economic science. 

It is of especial importance for our study to realise the 
early subordination of what we now term economic to 
wider considerations. Though fragments of economic 

86 


ECONOMICS AS A SCIENCE 


87 


thought and teaching are embodied in Babylonian, Assyrian, 
Egyptian, Chinese, and other revelations of primitive wis¬ 
dom, the earliest body of economic doctrine is attributable to 
Greek thinkers and grew out of their moral and political 
philosophy. 1 The conscious subordination of economics 
to ethics is indeed a presupposition of Plato and Aristotle. 
In the Laws, Plato names three things that are of concern 
for man, Mind, Body, and Estate, placed in this order of 
importance, and the last covered all that then belonged to 
organised economic life. This subordination of the eco¬ 
nomic was further emphasized in the ethical doctrine of 
Virtue as a Means. For with Plato, ‘wealth’ in the sense 
of large possessions and ‘intemperance’ seem to consort with 
one another. The ‘simple life’ accords with wisdom. A 
man’s external ‘wealth’ should be “such as to be in harmony 
with his inward wealth”. 2 Aristotle, on the other hand, 
recognises advantages for ‘wealth’; property is always rated 
by him as a means to ‘a good life’. Leisure and liberality 
require a reasonable amount of this world’s goods. To both 
thinkers money-making by trade or usury (banking or in¬ 
vestment) was an utterly contemptible practice. From this 
attitude of oligarchical philosophers, the later, and, in some 
respects, more liberal schools of great thought made no 
considerable departure. Epicurean and Stoic alike ap¬ 
praised property and economic activities according to some 
higher principle of life, whether it was the joy of living, 
or the more austere conception of a life ‘according to Nature’. 

§ 2. In the medieval order, when religious and political 
authority, sometimes accordant, sometimes discordant, 
claimed to regulate every department of social and private 
life, economic activities naturally fell under a hierarchy of 
values. Emphasising the spiritual power as the distinctive 
organising influence in medieval life, Mr. R. H. Tawney 

1 James Bonar, Philosophy and Political Economy, p. 5. 

2 Idem, p. 14. 


88 


ECONOMICS AS A SCIENCE 


writes: “The most fundamental difference between medieval 
and modern economic thought consists in the fact that, 
whereas the latter normally refers to economic expediency, 
however it may be interpreted, for the justification of any 
particular action, policy or system of organisation, the 
former starts from the position that there is a moral author¬ 
ity to which considerations of economic expediency must be 
referred.” 1 Up to the time of the Reformation the Roman 
Church with its Canon Law and Decrees claimed to exer¬ 
cise this moral authority. Nor did it disappear with the 
Reformation. For at least a century and a half after the 
Reformation the leaders of the principal Protestant churches 
continued to exercise this regulative power over business 
operations. “In the sixteenth century religious teachers of 
all shades of opinion still searched the Bible, the Fathers, 
and the Corpus Juris Canonici for light on practical ques¬ 
tions of social morality, and as far as the first generation 
of reformers was concerned, there was no intention among 
either Lutherans, or Calvinists, or x\nglicans, of relaxing the 
rules of good conscience, which were supposed to control 
economic transactions and social relations. If anything, in¬ 
deed, their tendency was to interpret them with a more 
rigorous severity, as a protest against the moral laxity of the 
Renaissance, and, in particular, against the avarice which 
was thought to be peculiarly the sin of Rome.” 2 

One of the most interesting and entertaining chapters in 
the history of modern thought is that dealing with the pro¬ 
cess by which the ethical doctrine of the Protestant Churches 
shed the safeguarding of social conduct and the conception 
of a spiritual community which possessed the medieval 
Church, and converted their ethics into an almost servile 
instrument of utilitarian individualism. Puritan morality 
prepared the way. “In their emphasis on the moral duty of 

1 Religion and the Rise of Capitalism, p. 39. 

2 Op. cit., p. 85. 


ECONOMICS AS A SCIENCE 


89 


untiring activity, on work as an end in itself, on the evils 
of luxury and extravagance, on foresight and thrift, on mod¬ 
eration and self-discipline and rational calculation, they 
had created an ideal of Christian conduct, which canonised 
as an ethical principle the efficiency which economic theorists 
were preaching as a specific for social disorders.” 1 

§ 3. It was far more than a mere coincidence that the rapid 
external evolution from primitive agriculture, small town in¬ 
dustries, and local commerce into modern capitalism, with 
its factory and power production, its elaborate finance and its 
world commerce, should synchronise with the decay of 
the spiritual authority of the Churches and the transvalua¬ 
tion of moral values which accompanied it. Without ac¬ 
cepting the cruder Marxian explanation of this moulding 
of moral doctrines and institutions to meet the requirements 
of the dominant economic class, it is unquestionably true 
that the rising bourgeoisie, the new business classes, aspiring 
to wealth, social importance, and political power, did utilise 
half-consciously but quite effectively the moral aids which 
organised religion was willing to offer, so as to clothe the 
new industrial, commercial, and financial methods with a 
garb of spiritual reputability. In the increasing ferment of 
interested and disinterested thought, stimulated by rapidly 
expanded knowledge of the world, and of human powers to 
utilise this knowledge for a fuller material and intellectual 
life, the conflict of new ideas and valuations led to the 
survival of those best accommodated to the interests and as¬ 
pirations of the classes possessing the will-to-power. 

Though there was no formal abandonment by the Prot¬ 
estant Churches of their spiritual authority over the con¬ 
duct of business — a religious man must still carry his re¬ 
ligion into his daily life — there was a tacit withdrawal from 
the enforcement of principles which conflicted with the prac¬ 
tices of rising capitalism. For example, the central principle 
1 Op. cit., p. 248. 


90 


ECONOMICS AS A SCIENCE 


of the economic ethics of medievalism was equality of bar¬ 
gaining; a contract was fair when both parties made an equal 
gain. Usury was denounced by St. Thomas and his school, 
not merely as the extortion of interest for loans made by 
the wealthy to the needy, but as covering every sort of bar¬ 
gain when the stronger party used his strength to the disad¬ 
vantage of the weaker. Such an ethics was accommodated 
to an age when custom and community prevailed and most 
business relations lay among neighbours, when ways of work 
and of living shifted very slowly and ‘chaffering’ was con¬ 
fined to a small part of the economic field. Every man 
was supposed to have his ‘status’ in the community and to 
give and get what belonged to that status. Now the Indus¬ 
trial Revolution, breaking the moulds of custom, and, by its 
new industrial methods and its attendant mobility and con¬ 
centration of labour, destroying the old bonds of neighbour¬ 
hood and community, made the older ethics seem impracti¬ 
cable. 

The shifting of the spiritual centre of gravity from the 
Church to the individual responsible for the saving of his 
soul was accompanied by an insensible shifting of all spirit¬ 
ual obligations to the individual, including those which bore 
on business life. Industry, thrift, keen bargaining, and com¬ 
petition, became the essential conditions of a good life in 
the new order, and preaching must conform to practice. 
The Smilesian ethics with its central thesis, that God helps 
those who help themselves, soon became an accepted teach¬ 
ing, and among more thoughtful Christians developed into 
the doctrine of “the unseen hand” whose guidance harmo¬ 
nised the selfish aims and efforts of individuals with the good 
of the community. The significance of this movement lay 
in the gradual segregation of the economic activities and 
their claim to a sort of moral autonomy. It was not until 
the nineteenth century that the casting off of political, cus¬ 
tomary, and religious controls had gone so far as to enable 


ECONOMICS AS A SCIENCE 


91 


the successful entrepreneur to make his Declaration of In¬ 
dependence, couched most conveniently in the phrase, “Busi¬ 
ness is Business”, i.e., is not answerable to politics, or religion, 
or morals. It may have political approaches and service¬ 
able contacts, it should treat the workers well, and should 
practise legality and integrity as rules of the business life. 
But it is distinctively an autonomous system, making its own 
terms with politics, religion, ethics. The political controls 
and the ethics of medievalism were obviously unfitted for 
this new order. The processes of producing, exchanging, and 
distributing wealth could not operate effectively except by 
their own self-made rules and regulations. So there came 
into existence a distinctive section of human behaviour 
suitable for separate scientific study, the ordered application 
of mental and manual labour to the production and market¬ 
ing of goods and services for monetary gain. 

§ 4. But this is not a sufficient account of the way in 
which an economic science arose. It ignores the adjective 
‘Political* appended to Economy in common usage. It has 
often been remarked that Political Economy arose with 
the modern nation state. And it is true that the require¬ 
ments of revenue by the modern state, and its controls in 
connection with revenue, were the beginnings of an orderly 
attempt to envisage the economic resources and activities of 
a nation as a whole. Taxation, coinage, and currency were 
the chief internal subjects of political solicitude. But it was 
foreign trade, considered chiefly in its bearing upon the 
King’s Revenue, that first gave significance to the term 
‘Political Economy* in its wider meaning. Even in Adam 
Smith we find that the department of public finance bulks as 
big in importance as private production and personal wealth. 
“Political Economy,’* he says, “proposes two distinct ob¬ 
jects: first, to provide a plentiful revenue or subsistence for 
the people, or more properly, to enable them to provide a 
revenue or subsistence for themselves; and secondly, to 


92 


ECONOMICS AS A SCIENCE 


supply a revenue sufficient for the public services. It pro¬ 
poses to enrich both the people and the sovereign.” 1 

But though revenue policy led to the broader surveys of 
economic resources and conduct, it kept Economics in strict 
bondage to Politics, and checked any disinterested approach 
to a science of wealth. Hobbes was a typical thinker of this 
order. Though his Leviathan 2 contains general ideas upon 
economics, derived from the organic conception of society, 
and an investigation of the determination of price and value 
that deserve the attention of the historian of economic the¬ 
ory, his study was kept in close subservience to his politics. 

It is to Petty and Locke we must look for the first serious 
attempts to lay the foundations of a definite economic sci¬ 
ence. Petty’s statement, “Labour is the father and active 
principle of wealth, as Lands are the mother,” 3 may be con¬ 
sidered the actual seedling from which economic science has 
grown. Add to this Locke’s saying that “It is labour that 
puts the difference of value upon everything”, 4 and we have 
a first approach to a disinterested economics. 

But it was long before an economic science or art could 
shake off the trammels of politics. The wide prevalence of 
the mercantile theory was secured at the outset by the single 
purpose of making the state strong by means of ‘treasure’, 
and was mainly concerned with trade balances as means of 
acquiring this treasure. A broader, more independent out¬ 
look is, indeed, displayed in a British writer of this school, 
Sir James Stewart. The subtitle of his book (published 
1767) is of special interest as attesting the scope of the new 
science. “An Inquiry into the Principles of Political Ecom- 
omy, being an essay in the science of Domestic Policy in 
Free Nations, in which are particularly considered Popula- 

1 Wealth of Nations, Book IV, Introduction. 

2 Leviathan, Part II, chap. 27. 

3 Economic Writings, Vol. I, p. 181. 

4 Civil Government, p. 184. 


ECONOMICS AS A SCIENCE 


93 


tion, Agriculture, Trade, Industry, Money, Coin, Interest, 
Circulation, Banks, Exchange, Public Credit, and Taxes.” 

But subservience to the state remains throughout the key¬ 
note to the mercantilist economics, and though its later 
treatment included most of the subject-matter of a disinter¬ 
ested science, this definitely political aim marked it as a de¬ 
partment of the art of statecraft. 

§ 5. In order that an independent science of Economics 
might arise, it was necessary for economic practice, business 
life, to throw off all close subordination to the state. So 
long as the state, either in the supposed interests of public 
order, or to furnish itself with revenue, maintained laws of 
settlement which impeded the economically advantageous 
movement of workers, gave monopolies of certain trades 
and occupations to Guilds or Companies, denied legal facili¬ 
ties to joint-stock enterprise, placed prohibitions or obstruc¬ 
tions upon internal and foreign trade, it was impossible to 
disentangle economic from political considerations for the 
purposes of a separate systematic study. 

Hence it was the great Protestant Liberal movement in 
religion and politics, the rise of a new powerful commercial 
class bringing into the new industrial arts and the widening 
ways of commerce the tough mentality of Puritanism, that 
brought about that liberation of economic processes from 
state control which made a separate economic science pos¬ 
sible. Laissez faire, laissez aller, meant “hands off” to State 
and Church, with a free run for the business instincts and 
processes. 

It is, of course, true that no complete autonomy for an 
economic system was attainable, nor, indeed, desired. The 
power of the state, with enforceable rules for the protection 
and transfer of property, for fulfilment of contract, for the 
issue of legal currency, and for many other matters touching 
business life, was almost universally upheld, as indeed it is 
to-day, by the extreme school of individualists. Moreover, 


94 


ECONOMICS AS A SCIENCE 


in Britain, as in other countries entering the modern era of 
machine-industry, the liberation from many obsolete politi¬ 
cal restraints was accompanied by a new development of 
public regulations in the shape of Factory and Workshops 
legislation, Companies Acts, Insurance and Employers’ Lia¬ 
bility Acts, many of them interfering with that absolute free¬ 
dom of contract which is the most fundamental principle 
of laissez faire economy. Lastly, the business classes in 
every country, while desiderating complete freedom in run¬ 
ning their businesses, have always shown willingness to avail 
themselves of assistance in the way of subsidies, tariff pro¬ 
tection, commercial treaties, and other concessions and fa¬ 
cilities, while the whole trend of the foreign policy of every 
state has been notoriously directed by the requirements of the 
commercial and investing classes. But this political and 
legal encompassment does not impugn the general truth 
of the statement that within the last few generations eco¬ 
nomic processes, the business life, have become an essentially 
autonomous system of human activity, with more and more 
complex relations, operated by rules worked out by business 
men for business purposes, and embodying a commercial 
ethics which differs sensibly from the private ethics of the 
family or other forms of the community. The price system, 
the market, is the central function of this economic life. All 
goods and services that come under its operation are wealth, 
have ‘value’, and are the products of economic activity. 

§ 6. The late emergence of an economic science is, how¬ 
ever, attributable in large part to the reluctance of even 
‘educated’ men and women to give a clear acceptance to the 
idea that any branch of human conduct is subject to laws, 
other than those with a moral or political sanction. The 
notion of any mental or social science was difficult to recon¬ 
cile with prevailing ideas of Providence upon the one hand, 
and with common experience of the ‘chances and changes 
of. this mortal life’ upon the other. 


ECONOMICS AS A SCIENCE 


95 


Even now most 'educated’ persons, who fully accept the 
reign of law in the physical sciences, give no full or genuine 
acceptance to law in the social sciences. It is not merely 
that ethics, politics, economics, sociology, are backward in 
the discovery and formulation of their laws: the laws are 
not 'there’ to be discovered, in the sense in which they are 
'there’ in physics and chemistry. 

Partly, no doubt, this attitude arises from the intractabil¬ 
ity of the subject matter of these studies, the difficulty of the 
demarcation of the several sciences, the narrow limits of ex- 
perimentalism, the emotional biases that beset the student. 
But there is also a feeling of doubt, or of disbelief, in the ac¬ 
tual operation of laws in the same sense in which they oper¬ 
ate in the physical sciences, or, put otherwise, a belief in 
some inherent incapacity of social phenomena to conform 
closely to any regulations inductively derived from past 
experiences. There is, as we have already acknowledged, a 
reasonable ground for this scepticism, in that social experi¬ 
ence is continually presenting 'novelties’ not wholly explica¬ 
ble by any laws derived from earlier experience in the same 
field. These novelties are the growing points in human his¬ 
tory, and of necessity they baffle law and prediction. But the 
interest attaching to them has unduly delayed the recogni¬ 
tion of the fact that human nature is after all only a branch 
of nature, and is amenable to laws as regular in their nor¬ 
mal operation over the human field of enquiry as is the 
case in other fields. Emergent creation does not negate law, 
it only limits it. 

But undoubtedly the feeling for and belief in free will 
and chance have impaired the acceptance of social laws, and 
unnecessary harm has been done by reluctance to admit that 
for purposes of prevision and human action laws are of more 
limited applicability when their subject matter is less static 
in its nature and less amenable to experiment under scien¬ 
tific conditions. The refusal to recognise the difference be- 


96 


ECONOMICS AS A SCIENCE 


tween inorganic and organic, and between organic and psy¬ 
chic, between psychic and self-conscious, in forming the con¬ 
ception and scope of ‘natural laws’ has been a source of 
great confusion in the social sciences. Positivism has some 
responsibility for this confusion. “If sociological laws,” 
wrote Comte, “are positively established as certainly as the 
laws of gravitation, no room is left for opinion; the proper 
function of every member of society admits of no question: 
therefore the claim to liberty is perverse and irrational.” 1 

But the belief that industry was a department of nature, 
subject to laws as binding in their force and as immutable 
as the laws of physics, was, indeed, the underlying assump¬ 
tion of the first conceivers of an economic system, the Physio¬ 
crats. Their title was indicative of an organised attempt 
to extend the conception of a natural order into the field of 
human arrangements. Their ‘natural order’ had, indeed, 
a double significance. In general the Physiocrats were fol¬ 
lowers of Rousseau in the sense of believing in an ideal order, 
a primitive nature which was identified with Right. But 
their more distinctive contribution to thought lay in their 
insistence that the production and distribution of goods 
conformed to laws of nature as absolute and stable as those 
which regulate inanimate nature, though operative through 
the apparently ‘free’ acts of men. 

It is important to realise that the first conception of an 
economic system was that of a natural harmony of individ¬ 
ual interests and wills. “The Physiocrats believed that the 
individual knew his interests best, or, in other words, would 
act more in accordance with the law of nature than would 
government. Hence their well-known maxim, laissez faire, 
laissez oiler , that is, let things alone, let them take their 
course. The only function of government according to this 
doctrine is to protect life, liberty and property.” 2 

1 Quoted Bury, The Idea of Progress, p. 301. 

2 Haney, History of Economic Thought, p. 140. 


97 


ECONOMICS AS A SCIENCE 

It is not necessary for our purpose to set out the substance 
of this economic system. It suffices to say that, like other 
systems, it takes its shape and complexion from the cur¬ 
rent economic interest of its time and country. Here in 
eighteenth century France the fons et origo of production 
and of wealth was the work upon the land, the sole source 
of a material surplus. This idea led Quesnay, the chief de¬ 
veloper of the theory, into his three-fold classification: 

(1) the productive class, mainly agriculturists. 

(2) the proprietors, or landowners, productive in so far 
as they were active administrators of their estate. 

(3) the non-productive or sterile class, which included 
merchants, artizans, and professional men. 1 The distribu¬ 
tion, or circulation, of the annual net product of the extrac¬ 
tive industries, the material source of gain, was the chief 
subject of the economic enquiry. Among some exponents 
of this ‘science’ a dominant interest was the sense of the 
misery of the great peasant population forming the prepon¬ 
derant part of the nation. These appeared as the sole pro¬ 
ducers, all other sections of the people as manipulators, car¬ 
riers, or parasitic consumers. But to Quesnay, and some oth¬ 
ers, Physiocracy was a glorification of the landlord capitalist 
who supplied what later economists would have termed the 
fixed and circulating capital needed to work the farms, ac¬ 
quiring it from what source and by what method of extrac¬ 
tion neither Quesnay nor any other Physiocrat thought fit 
to disclose. 

§ 7. When this rationalist doctrine of an economic system 
operated by natural laws crossed the English Channel it suf¬ 
fered a sea-change. For, though agriculture was still the 
largest occupation, Britain’s growing economic interests 
manifestly lay in her manufactures, her commerce, and ship- 

1 This did not signify that the third class was useless, only that they 
did not contribute to the net product, or material surplus, which is got 
by work out of nature. 


98 


ECONOMICS AS A SCIENCE 


ping, and these activities chiefly engaged the minds of prac¬ 
tical economists. The natural harmony of economic activi¬ 
ties, which Adam Smith displayed in his Wealth of Nations 
(1776), took therefore a different pattern from Quesnay’s 
Tableau Economique (1758). 

Smith’s contribution towards an economic science was of 
a three-fold character. (1) With the Physiocrats he achieved 
an almost complete severance of Political Economy from its 
earlier association with Moral Philosophy, and put it on a 
positive footing of its own, a line of conduct remarkable in 
one whose chair at Glasgow was that of Moral Philosophy 
and whose political economy was first conceived as an inte¬ 
gral part of that philosophy. (2) He assembled from many 
special studies an immense body of relevant knowledge, both 
of fact and theory, making thus a more complete com¬ 
pendium of the materials needed for an economic science 
than had as yet been made. (3) He endowed this loose eco¬ 
nomic body with an operative spirit in the harmonious inter¬ 
play of individual self-interests which led the members of 
an economic group to apply their several abilities and op¬ 
portunities so as best to contribute to the common wealth. 

To the validity of this ‘harmony’ I return later. Here I 
cite it as one of the central theses which enabled the idea of 
a separate economic theory, or science, to present itself as 
intelligible. 

To the modern economist the Wealth of Nations is a curi¬ 
ously unsatisfactory basis for a science. Loose-jointed and 
discursive, it sandwiches passages of deductive reasoning be¬ 
tween long historical disquisitions, and exhibits no attempt 
to draw together any general body of doctrine upon such 
vital topics as value or the theory of distribution. Much of 
it is controversy bearing on the vices of the existing economic 
order and is inspired by a reforming spirit. In judging it, 
however, it is important to remember that it was written be¬ 
fore the Industrial Revolution had exhibited its size and 


ECONOMICS AS A SCIENCE 


99 


strength, when the free flow of capital and labour was only 
beginning to transform industrial England, and when the 
immediately urgent task was to liberate the minds of the 
ruling classes from the surviving fetters of an obsolete me¬ 
dieval economy. The full significance of the modern capital¬ 
ist system came later, and its coming visibly affected the 
uses to which the Wealth of Nations was put by the early 
nineteenth century economists. 

The makers and masters of the new capitalism — the 
strong, successful cotton manufacturers, ironmasters, bank¬ 
ers, and financiers — needed, for their own intellectual guid¬ 
ance, for securing the political reforms called for by the new 
economy, and, lastly, for the education of a public opinion 
favourable to progressive business methods, a body of doc¬ 
trine, simple, dogmatic, and carrying the authority of inevi¬ 
table law. This was furnished by Ricardo, James Mill, Mc¬ 
Culloch, and other members of the hard-headed group of 
rationalists and utilitarians who were devoting themselves 
to this, the most practical of the social sciences. For the 
most part devout followers of Bentham and imbued with his 
spirit of humanity, they were none the less impelled to work 
out their economic science on lines which severed economic 
conduct too sharply from the general conduct of life, and 
imputed to it a too closely specialised set of economic 
motives. 

The implications of a natural harmony of self-interests in 
Smith’s teaching were tightened up, many of his human 
qualifications were squeezed out, the central control was al¬ 
lotted to the capitalist entrepreneur, and the system was de¬ 
voted exclusively to material production. 

§ 8. Before taking up the question of the relation of this 
economic theory, in its later classical development, to the 
ethical, humanitarian criticism with which it was confronted, 
it is convenient to pause here in order to get an understand¬ 
ing of the scope and method of the new science. In reading 


100 


ECONOMICS AS A SCIENCE 


the works of the economists from Adam Smith to J. S. Mill, 
and even later, it is rare to find any clear, intelligible, or con¬ 
sistent definition of their subject-matter. 

If ‘wealth’ be the subject-matter, as Adam Smith’s title 
suggests, what is meant by wealth? Smith is exceedingly ob¬ 
scure. He tells 1 us that wealth is “power of purchasing; a 
certain command over all labour or over all the produce 
of labour which there is in the market”. He waits until 
Chapter V to tell us this. But this identification of wealth 
with purchasing power will not do. We are later told that 
the wealth of a nation is its “annual produce”, or, “the neces¬ 
saries or conveniences of life which it annually consumes”. 
But still less will this do. A progressive nation does not 
consume the whole of its “annual produce”. Or does Smith 
exclude all capital goods from “annual produce”? Among 
earlier economists there was a reluctance to admit wealth as 
the subject matter. Ricardo has nothing to say about 
wealth. He starts with value and the conditions that deter¬ 
mine it. If you ask value of what, his answer is “commodi¬ 
ties”, and James Mill opens with the production of commodi¬ 
ties, and does not speak of wealth. Malthus defines wealth 
as “the material objects, necessary, useful, or agreeable to 
man which are voluntarily appropriated by individuals or 
nations.” 2 For Whateley wealth is “things contemplated as 
exchangeable’ 3 — a definition which excludes goods in the 
hands of consumers. Senior includes under wealth “all those 
things and those things only which are transferable, are 
limited in supply, and are directly productive of pleasure or 
provocative of pain”, 4 excluding all capital goods! Francis 
Walker, opening his Political Economy with a search of a def¬ 
inition of wealth, finds so much confusion in the treatment by 
economists that he virtually abandons the attempt, falling 

1 Book I, p. 33. 

2 Political Economy, p. 33. 

3 Idem, p. 5. 4 Idem, p. 6. 


ECONOMICS AS A SCIENCE 


101 


back upon the “almost general agreement” of the man in the 
street. 1 He endorses J. S. Mill’s statement that “Everyone 
has a notion sufficiently correct for common purposes of 
what is meant by wealth.” Unfortunately “common pur¬ 
poses” hardly satisfy the requirements of scientific study, as 
Mill himself shortly recognises when he indicates as wealth 
“all useful or agreeable things which possess exchangeable 
value”, 2 but a little later 3 narrows the scope of Political 
Economy to “material wealth”. Jevons follows James Mill 
in preferring “commodities” to “wealth”. But though he 
says (Theory , p. 1) that “The science of Political Economy 
rests upon a few notions of an apparently simple character; 
utility, wealth, value, commodity, labour, capital, are the 
elements of the subject” and proposes to devote “the follow¬ 
ing pages to an investigation of the conditions and rela¬ 
tions of the above-named notions”, we find no discussion 
of “wealth”. Marshall in his Principles (p. 1) identifies 
wealth with “the material requisites of well-living”, a far too 
comprehensive account, for many of these requisites cannot 
by the most liberal interpretation rank as economic “wealth”. 
In his Economics of Industry there is worse confusion. For 
there under the wealth of a man we find two classes of 
goods. 

“In the first class are those material goods to which he has 
(by law and custom) private right of property, and which 
are therefore transferable and exchangeable. In the second 
class are those of his immaterial goods which are external 
to him and serve directly as the means of enabling him to ac¬ 
quire material goods, such, for instance, as the good will of 
his business or professional practice.” 4 He adds in a foot¬ 
note, “It is perhaps hardly necessary to say that services and 

1 Idem, p. 6. 

2 Idem, p. 6. 

3 Idem, p. 30. 

4 Economics of Industry, p. 52. 


102 


ECONOMICS AS A SCIENCE 


other goods, which pass out of existence in the same instant 
that they come into it, do not contribute to the stock of 
wealth and may therefore be left out of our account.” This 
will never do. A medical practice is wealth, but the particu¬ 
lar bits of practice are not! Why are services of brief dura¬ 
tion to be excluded? Why the statical condition of belonging 
to a “stock of w r ealth”? All wealth is momentary, if it be 
resolved, as it may, into the ‘utility’ of the units of which 
it is constituted. 

The general tendency among economists right up to the 
present day has been to include only material goods in 
wealth. So Taussig: “Wealth has been described as con¬ 
sisting of those goods which are not free. The term refers 
primarily to things that are tangible and material.” 1 Cannan 
writes, “It is quite convenient to have a separate depart¬ 
ment of science, called economics, to deal with the causes 
of the material welfare or wealth of human beings, consid¬ 
ered both as a whole and as individuals, and also in groups.” 2 
The term “material welfare” introduces a fresh confusion. 
‘Material wealth’ and ‘physical welfare’, if you like, but 
surely not “material welfare”. Pigou in his important trea¬ 
tise, Economics of Welfare (1920), regards ‘economic welfare’ 
“that part of social welfare that can be brought directly or 
indirectly into relation with the measuring rod of money” 
as the subject-matter of economic science. For him there is 
no ‘material welfare’, for “welfare includes states of con¬ 
sciousness only and not material things.” 3 

II 

Speaking generally, we may say that, from Ricardo to 
J. S. Mill’s Principles, economic science hardened towards 
materialism in its view of wealth and income as its subject- 
matter, and that from J. S. Mill onward there has been a 

1 Principles, p. 15. 

2 Wealth, p. 18. 3P. 10 . 


ECONOMICS AS A SCIENCE 


m 


growing disposition towards a broader utilitarianism trans¬ 
lating wealth into subjective welfare. There has also been 
a marked tendency to put income in the place once occu¬ 
pied by wealth in a working theory of economics. An ad¬ 
vantageous effect of this change has been to include all pur¬ 
chasable services, professional and others, in the subject- 
matter of economic science, goods and services ranking on an 
equal footing in the price system. This is made clear by 
Pigou’s identification of economic welfare as “that which 
can be brought directly into relation with the measuring rod 
of money.” 

Economics thus approaches the position of being a calculus 
of pleasures and pains, satisfactions and dissatisfactions, 
costs and utilities, in relation to all marketable goods and 
services. Jevons was the first among prominent English 
economists to conceive his science in this subjective way. 1 
His analysis of utility as the basis of value, had it been ac¬ 
companied by a corresponding analysis of disutility, would 
have transformed the science by resolving the concrete prod¬ 
uct and income of the community into terms of human 
satisfaction. Unfortunately neither Jevons nor his succes¬ 
sors recognised the logical necessity of applying to the pro¬ 
cesses of producing the national income or dividend the same 
subjective analysis w T hich they applied to the utilisation of 
that income in the processes of consumption. Though Pigou, 
in setting out his contention of economic welfare in relation 
to the material dividend, expressly recognises that “The 
quantity of economic welfare associated with any volume of 
the dividend depends, not only on the satisfaction yielded by 
consumption, but also on the dissatisfaction involved in pro¬ 
duction”, 2 his treatment is virtually confined to the former 
factor, with rare and casual reference to the latter. 

1 For some criticism of the limitations of his application of the 
principles, see my Free Thought in the Social Sciences, Part II, chap. 2. 

2 Economics oj Welfare, p. 43. 


104 


ECONOMICS AS A SCIENCE 


An even-handed calculus of the subjective costs and utilh 
ties, involved in the processes of production and consump¬ 
tion of the dividend in relation to the concrete nature of that 
dividend and its distribution, is a task to which modern econo¬ 
mists might well have addressed themselves had they not 
been led to envisage their problem too exclusively in terms 
of the utilisation of the dividend by consumers. 

§ 9. But even were this task fulfilled, of resolving the real 
income, or dividend, into the human costs and satisfactions 
attendant on the processes of producing and consuming it, we 
should still be confronted with grave difficulties in relating 
the ‘economic welfare’ thus indicated with ‘human welfare’ 
in the meaning ascribed to it. 

The difficulties are these. First, what may be termed the 
‘ins and outs’ problem. Secondly, the question of the appli¬ 
cation of a quantitative calculus to qualitative differences of 
cost and satisfaction. Thirdly, the direct confrontation of 
‘is’ and ‘ought’, the current valuation with the ethical, the 
fitting of economic welfare into the organic scheme of human 
welfare. 

The first difficulty need not detain us long. It has been 
generally recognised by economists that there is no fixed or 
certain line of demarcation between economic and non¬ 
economic activities and goods. A wife and a paid house¬ 
keeper may perform identical services within the home, but 
the former’s services do not rank as economic and earn no in¬ 
come, while those of the housekeeper do. If a man marry 
his housekeeper, he thereby diminishes the general income 
or economic product! As civilisation advances, many sorts 
of ‘free’ goods become economic goods, acquiring value. 
Free land may be enclosed and utilised: fishing rights emerge, 
water becomes a salable commodity, air and sunshine add 
to rental value. In the realms of art and handicraft much 
of the same sort of work is done for love and for money, but 
only the latter counts as ‘wealth’. When an amateur be- 


ECONOMICS AS A SCIENCE 


105 


comes a professional in painting, dancing, carpentry, or base¬ 
ball, he increases the output of economic wealth, though he 
has not changed the quantity or quality of his activity. 
Other difficulties of economic computation arise when private 
properties or functions are taken over by the public and are 
administered without charge. Economic wealth is dimin¬ 
ished when a millionaire donates his private grounds for a 
public park, or his pictures to a public gallery. But such 
blurring of margins affects the demarcation of every science, 
and in particular of those directed to some function of organic 
life. 

The peculiar nature of organic relations, however, gives 
rise to a graver problem. So long as Political Economy was 
content to concern itself with quantity of vendible goods and 
with the activities of man in making and selling them, these 
goods and activities being registered in value by their price, 
the ‘measuring rod of money’ could disregard qualitative dif¬ 
ferences, except so far as they were found to affect price. 
This was the era of the ‘economic man’. Modern economists 
sometimes deny that their predecessors ever taught ‘the doc¬ 
trine’ of the economic man in the sense of depicting a state of 
society in which greed was in perpetual conflict with sloth, 
man being driven by pure self-interest to produce the mate¬ 
rial means of satisfying his desires. Now it is doubtless true 
that neither Ricardo, nor James Mill, nor any of their fol¬ 
lowers were so foolish as to believe that actual men were so 
simply motivated. But they did plan an economic science 
on the hypothesis of this simplified motivation. They said 
in effect, “Let us take the province of economic activities and 
people it with intelligent, self-interested beings, each seeking 
to get the most for himself by the least expenditure of effort, 
putting himself and his economic resources to the most profit¬ 
able employment. This course will lead to the maximum 
production of wealth.” Occasional qualification of the self- 
interested motive by reference to other motives and condi- 


106 


ECONOMICS AS A SCIENCE 


lions does not seriously affect this presentation of the earlier 
economic theory. So long, indeed, as economic wealth was 
assessed solely by its monetary value, it was reasonable 
enough that a segregation of economic motives should be 
posited, abstraction being made of all other conflicting mo¬ 
tives in human conduct. Within limits this use of ‘as if’ is 
legitimate and even necessary. Conceive man as driven by 
a single set of desires, aiming at a goal called ‘wealth’ con¬ 
ceived in terms of mere quantity; you then have the essen¬ 
tial character of the early hypothesis. 

But when consideration of the pleasure and pain, satisfac¬ 
tion and dissatisfaction underlying these objective quanti¬ 
ties presses into the science, the early hypothesis is shattered. 
When we reach Pigou’s statement that economic “Welfare 
consists of states of consciousness only and not material 
things”, we cannot any longer treat wealth in terms of mere 
quantity, or motives relating to it in separable measurable 
units. The relation between a conglomerate mass of eco¬ 
nomic goods, constituting a stock or flow of wealth, and sat¬ 
isfactory ‘states of consciousness’ can no longer be expressed 
in a simple calculus. For the quantity of satisfaction at¬ 
tached to any piece of economic wealth has to be translated 
into the separate satisfactions and pains of producing and 
consuming it, and those will vary with the persons who pro¬ 
duce and consume it and the conditions under which they do 
so. Even if we keep for the present within the test of cur¬ 
rent desires and valuations, it becomes evident that the eco¬ 
nomic welfare represented by each $100 worth of ‘the na¬ 
tional dividend’ will vary indefinitely according to the qual¬ 
ity or character of the goods it represents and the nature and 
conditions of the persons who have produced or will con¬ 
sume these goods. 1 

1 Mr. W. A. Robson in his valuable little book, The Relation of 
Wealth to Welfare, cites a number of passages from Dr. Marshall’s 
Principles of Economics, indicating a belief that some measurable re¬ 
lations existed between income and happiness. 


ECONOMICS AS A SCIENCE 


107 


“The product of a business will, it appears, vary in the 
amount of economic welfare it contains, according as the 
total cost or disutility of producing and the utility of consum¬ 
ing it are high or low. The amounts on both sides of the 
equation will evidently vary with the distribution of these 
costs and utilities. The maximum of wealth, as welfare, at¬ 
taching to a given stock of goods, will involve such a distribu¬ 
tion of the productive energy among producers as will yield 
a minimum amount of painful or injurious effort, and such a 
distribution of the consumptive utilities which the goods 
contain as will yield a maximum of pleasurable or service¬ 
able consumption. In this problem of envisaging a body of 
objective wealth in terms of subjective wealth, or economic 
welfare, it is impossible to maintain a separate treatment of 
the cost of production and the utility of consumption. For 
the amount of satisfaction which such a body of wealth rep¬ 
resents must take both simultaneously into consideration. 
You cannot, even theoretically, consider the amount of dis¬ 
utility, or painful cost, which goes into producing a body of 
goods, separately from the consideration of the amount of 
utility, or satisfaction, it yields in its consumption. For in 
an individual, or a society, these two functions evidently in¬ 
teract. Conditions of production, e.g., in respect of hours 
of labour, nature of work, etc., must react upon conditions of 
consumption, i.e., capacity for utilising these or any other 
kinds of goods. Conversely, conditions of consumption, e.g., 
amount of leisure, skill, and experience in utilising different 

“When we speak of the dependence of well-being on material wealth, 
we refer to the flow or stream of well-being as measured by the flow or 
stream of incoming wealth and the consequent power of using and 
consuming it” (Principles of Economics, Eighth Edition, p. 134). 
Again, “It has been assumed that the happiness of life, in so far as it 
depends on material conditions, may be said to begin when the income 
is sufficient to yield the barest necessaries of life: and after that has 
been attained, an increase by a given percentage of the income will in¬ 
crease that happiness by about the same amount, whatever the income 
may be” (p. 717). A strange flaw of constant returns’! 


108 


ECONOMICS AS A SCIENCE 


kinds of goods, will, by reaction upon personal efficiency, 
make a working day easier or more difficult.” 1 

In other words, the purely quantitative calculus of the 
classical and neo-classical economists fails because it does 
not take into account the organic unity of man. To break 
him up into a producer and a consumer for separate treat¬ 
ment, to give entirely separate attention to each unit of each 
article of consumption in the total of utility got out of his 
income, and each time unit in his working day, commits a 
double offence against his organic unity. For, in the first 
place, it ignores the organic interactions between his eco¬ 
nomic and non-economic life in respect of welfare, though 
the interactions of these diverse activities must count heav¬ 
ily in any true estimate of the effect of economic life on hu¬ 
man welfare as an organic whole. If a man’s work neces¬ 
sarily affects his mentality, his social and intellectual inter¬ 
ests, his home life, his politics, religion, and recreations, these 
vitally important elements of welfare, thus affected, can¬ 
not be ruled out of the purview of an economic science which 
treats economic welfare in terms of states of consciousness. 
The penetration of economic into non-economic life, however 
difficult to analyse and assess, cannot be ignored. 

§ 10. This criticism does not imply that the quantitative 
analyses and statistical studies based upon the isolation of 
particular economic activities and motives are illicit or un¬ 
fruitful. On the contrary, immense value attaches to the 
objective studies of price and other financial movements 
which have assumed an ever increasing prominence in mod¬ 
ern economics. Our point is that no satisfactory valuation 
of economic welfare as a whole, still less of the influence of 
economics upon human welfare in its wider significance, can 
be got, even theoretically, out of the multiplication or per¬ 
fection of such studies. The reason is that the organic char¬ 
acter of man and society is such that no purely quantitative 

1 J. A. Hobson, Free Thought in the Social Sciences, p. 132. 


ECONOMICS AS A SCIENCE 


109 


analysis can do all that is needed for understanding and di¬ 
rection. The science of economics, like other sciences, posits 
for its goal a perfection of quantitative measurements. But 
the essential character of every organic subject-matter is that 
it presents qualitative differences which cannot ultimately be 
reduced to terms of a common denominator. This refrac¬ 
tory feature of organic studies has always troubled psy¬ 
chology in its efforts towards scientific exactitude. The 
formulas of early utilitarianists were wrecked on the hy¬ 
pothesis of pleasure or happiness being of a single kind, so as 
to admit of “a greatest happiness” for a person or “a greatest 
number”. J. S. Mill’s recognition of the truth that pleasures 
and utilities are of different kinds and of incommensurable 
values destroyed the hedonist calculus that was the basis of 
the Benthamite utilitarianism. But unfortunately it sur¬ 
vived almost intact in the economic science where it was 
sustained by an illusory interpretation of distinctively eco¬ 
nomic conduct. 

The measuring rod of money in a price system appears to 
perform the task of enabling a buyer to compare the satis¬ 
factions he may receive from the consumption of goods or 
services of the most diverse kinds by reducing them to some 
common character of ‘desiredness’. He will expend a fifty 
dollar bill partly on a dinner, partly on a concert ticket, partly 
on a subscription to a mission, in such proportions that the 
last ten cents expended on each object yields him exactly the 
same amount of satisfaction! His consciousness is an alem¬ 
bic which can resolve the differences of an appeal to the 
palate, musical taste, and a regard for heathen souls to 
some featureless fund of human satisfaction. The economist 
with his naive psychology shows this process operating in the 
mind of Mrs. Jones, as she lays out the limited family in¬ 
come, or in the mind of Mr. Jones as he organises a new de¬ 
partment in his works. In point of fact Mrs. Jones does not 
make a conscious comparison of the quantity of satisfaction 


110 


ECONOMICS AS A SCIENCE 


she gets from a given expenditure on butter with that got 
from a similar contribution to a mission. She contains as a 
part of her psycho-physical make-up a fairly constant stand¬ 
ard of expenditure, based upon her total personality and her 
obligations to herself, her family, and society. This expen¬ 
diture, though varying somewhat all the time, and involving 
new adjustments, is sufficiently organic in its structure to 
regulate the amounts expended on each object without im¬ 
posing the impossible task of a separate comparison of di¬ 
verse satisfactions. Even when some change in her pecuni¬ 
ary resources, or the needs of her family, involves some re¬ 
distribution of the funds between different items of expendi¬ 
ture, that readjustment, though involving some increases or 
cuts of exact dimensions, is not governed, as economists sug¬ 
gest, by conscious calculations of marginal utility, but by 
some central organic policy from which these quantitative 
changes flow. And it is just the same when Mr. Jones plans 
his new works. He may seem to make a number of separate 
calculations in the outlay of his capital and the number of 
workers he takes on for each process, comparing with exacti¬ 
tude utilities of production of many diverse kinds. But in 
fact all these estimates are governed by the conception in his 
mind of an up-to-date, efficient plant, the general organisa¬ 
tion of which requires that just so much shall be laid out in 
this way, just so much in that. 

§ 11. But if the economic calculus cannot enable an in¬ 
dividual producer or consumer to make a separate evalua¬ 
tion of each item in his various costs and satisfactions by 
referring them to a common standard of value, still less can 
this measuring rod be applied to estimate the psychic wealth 
of a community of producer-consumers. For the personality 
of A., so far as it is stable, does enable him at least to envis¬ 
age his satisfactions in some order of importance and prece¬ 
dence, whereas there is no way in which the psychic income, 
which A. may get out of a given money income, can be com- 


ECONOMICS AS A SCIENCE 


111 


pared with that which B. may get. For even those to whom 
society is a sort of super-personality would hardly maintain 
that the organic unity was as close and real as that of the in¬ 
dividual personality. As our earlier discussion of the mean¬ 
ing of ‘social welfare’ has indicated, we cannot carry the as¬ 
sumption of equality or similarity of nature, needs, and satis¬ 
factions further than the similarity of psycho-physical 
make-up in individuals living in what is called the same en¬ 
vironment may seem to warrant. While this takes us a cer¬ 
tain way towards estimating the volume of satisfaction which 
a given distribution of money income will supply, especially 
as applied to meet those primary physical requirements in 
which different persons are most alike, it cannot lend itself to 
any exactitude of estimate. Differences of inborn nature, 
physical and spiritual environment, training and occupation, 
will necessarily endow different persons with differences of 
economic valuation that must defy any close computation of 
the relations between a body of concrete wealth and the wel¬ 
fare it may connote, according to the terms on which it is pro¬ 
duced and consumed. 

When we also bear in mind that the arts both of produc¬ 
tion and consumption in a modern community are continu¬ 
ally changing, and with them the human costs and utilities 
attaching to the real income, we shall realise how illusory is 
the exactitude claimed or suggested by statistics of income as 
indices of economic welfare. 

Useful then as are the statistical studies, which play so 
large a part in modern economics, for practitioners in the 
various departments of economic activity, and for students 
of general movements of money and of material goods, they 
cannot properly be treated as the material for an inductive 
science of economics which claims to go beyond the counting 
house, so as to translate its figures into terms of economic 
welfare. 


CHAPTER II 

ECONOMIC AND ETHICAL VALUES 


I 

§ 1. By a somewhat circuitous route we are brought to 
the centre of our enquiry, the confrontation of economic 
with ethical or human values. This is not the same prob¬ 
lem as that which concerned us in the last chapter, viz., the 
relations between objective wealth and wealth as expressed 
in current desires and valuations. For though that consid¬ 
eration, raising, as it did, the question of the organic unity 
of personality, led us to recognise the many intricate inter¬ 
actions between economic and non-economic activities and 
satisfactions, it did not directly raise the root-issue between 
industry and ethics, the consideration of economic processes 
and ends in the light of ethical or human ideals. 

As was indicated in our opening chapter, modern capital¬ 
ism from its rise was subjected to a current of ‘humanist’ 
criticism, assailing its injustice, inhumanity, its materialism, 
and its degrading reactions upon aesthetic tastes and values. 
It is important to understand how it was that the early econo¬ 
mists, mostly men of high and humane principles, were able 
to ignore this criticism, and to devote their energies to the 
construction of an economic science which remained impervi¬ 
ous to these charges. 

In part the explanation lay in the mentality of the large, 
new, dominant type of business man, who imposed his stand¬ 
ard of values upon the society in which he moved. The 
rapid increase of productivity, due to machinery and power, 
112 


ECONOMIC AND ETHICAL VALUES 113 


was so much the most impressive feature of the age as to en¬ 
list in its service alike the virtues and the defects of the 
middle-class character and outlook. We have noted how 
the puritan nonconformist stock and morals were adapted 
to supply the hard energy, industry, and competitive enter¬ 
prise, which the new industry required. The moral individ¬ 
ualism which marked their theology, the personal obligation 
on every man to save his own soul, gave a spiritual back¬ 
ground to an economic outlook that threw upon every indi¬ 
vidual a corresponding obligation to save himself in this life 
by strenuous struggle with the powers of evil, in the shape of 
sloth, intemperance, dishonesty, and other vices of character. 
The acquisition of wealth was regarded as a legitimate, nay, 
a praiseworthy test of personal merit. The temptations it 
brought with it were to be overcome, not to be evaded. 
Wealth was not to be employed in luxury or dissipation: 
thrift, saving, and keen-eyed investment formed a real con¬ 
tribution to the moral ideal of this society. These duties 
were fulfilled, and they visibly matured in a rapid rise of an 
increased wealth, easily envisaged as national prosperity. 
Among the more thoughtful members of this class the com¬ 
petitive struggle for gain thus became a branch of natural 
piety. Decent, respectable, church or chapel-going men 
rightly devoted themselves to these week-day duties, duties 
no doubt primarily due to themselves and their families, but 
likewise to society and to God. The callous indifference they 
displayed to the poverty and misery of so many of their fel¬ 
low creatures, which sometimes arouses suspicion and indig¬ 
nation in the modern mind, was mainly attributable to a 
general failure to recognise that ‘society’, as such, was in any 
way causally responsible for this poverty and misery. A 
low standard of living for the mass of the workers was ac¬ 
cepted as a natural condition; and lapses into actual want 
attributed either to the fault or the misfortune of the indi¬ 
viduals concerned. For misfortune there was the bestowal 


114 ECONOMIC AND ETHICAL VALUES 


of charity, itself part of the moral reward of successful in¬ 
dustry: for the faults of the poor, condonation or help would 
be an encouragement to weakness or vice. Such was the 
typical attitude of the great striving middle-classes, based 
upon a firm though unformulated conviction that everybody 
was and ought to be responsible for his performance of his 
duty as an efficient producer and a careful consumer. 

So far as this could be regarded as a 'philosophy of life% in 
which there was so little thinking, its central thesis was an 
identification of mere activity with duty and happiness. 
Matthew Arnold found in this genius for ‘doing’ the charac¬ 
teristic of the British Philistine, whose portrait is that of the 
successful nonconformist business man of the mid-century. 
The worship of energy, of doing for doing’s sake, and irre¬ 
spective of the quality of what is done, is distinctively an 
Anglo-Saxon trait. Though its main source is instinctive, it 
has always had an intellectual backing among thinkers in 
revolt against the idleness of thought, the admiration of the 
student for the ‘red blood’. Especially in America, the land 
of boundless energy, this creed survives to-day. It finds its 
latest and most unqualified expression in the work of an 
economist. “From our point of view,” writes Dr. Carver, 1 
“living well means living an energetic life, that is, a life in 
which the energy of the body is not only made kinetic, but 
is so applied as to enlarge the possibilities of human life, or 
to enlarge the stream of human energy.” Energy not merely 
measures happiness but is happiness. For “More solar 
energy would be transformed into human energy in one case 
than the other, or, as some would prefer to have it said, more 
human happiness would exist in a Workhamite than in a 
Resthamite world.” 2 

While this extrovert temper in the masters of modern capi¬ 
talism and their theorists gave a justification to the business 

1 The Economy of Human Energy, p. 14. 

2 Idem, p. 17. 


ECONOMIC AND ETHICAL VALUES 115 


life which hindered its confrontation with humanist or ethi¬ 
cal standards, the rising science of Economics enjoyed the 
moral support of the doctrine to which we have already made 
allusion under the title of The invisible hand’. The selfish¬ 
ness and greed of the competitive struggle was morally re¬ 
deemed and consecrated by the conception of a code of nature, 
establishing a natural harmony. The theory was of ancient 
origin and by no means especially designed for economic ap¬ 
plication. The best succinct analysis is that given by Mr. 
Cliffe Leslie. 

“An examination of Adam Smith’s philosophy enables us 
to trace to its foundation the theory upon which the school in 
question has built its whole superstructure. The original 
foundation is in fact no other than that theory of nature 
which, descending through Roman juristic philosophy from 
the speculations of Greece, taught that there is a simple code 
of nature which human institutions have disturbed, though 
its principles are distinctly visible through them, and a bene¬ 
ficial and harmonious order of things which appears where- 
ever nature is left to itself. The political philosophy flow¬ 
ing from this ideal source presents to us sometimes an as¬ 
sumed state of nature or of society in its natural simplicity; 
sometimes an assumed natural tendency or order of events, 
and sometimes a law or principle of human nature; and these 
different aspects greatly thicken the confusion perpetually 
arising between the real and the ideal, between that which 
by the assumption ought to be and that which actually is. 
The philosophy of Adam Smith, though containing an induc¬ 
tive investigation of the real order of things, is pervaded 
throughout by this theory of nature, in a form given to it by 
theology, by political history, and by the cast of his own 
mind.” 1 

If the obstructions which human institutions had placed 
upon the free operation of natural tendencies in the sphere 
1 Essays in Political Economy and Moral Philosophy. 


116 ECONOMIC AND ETHICAL VALUES 


of industry and commerce were removed, a beneficial and 
harmonious order would emerge. The liberative tasks, to 
which our early economists devoted themselves, were un¬ 
doubtedly inspired by this belief in letting nature take her 
course. It was, however, with Smith and his followers no 
merely negative gospel. Freed from her shackles, nature 
would give positive guidance to individuals in the conduct of 
affairs. Each man would be “led as by an invisible hand to 
promote an end which was no part of his intention”. “By 
pursuing his own interest he frequently promotes that of the 
society more effectually than when he really intends to pro¬ 
mote it.” 1 

Nor is this natural harmony applicable only to the deal¬ 
ings of individuals. Through individual conduct it har¬ 
monises the apparent conflicts of competing businesses, 
trades, and trading peoples, leading men through divided 
labor so to cooperate as to bring to all their proper share in 
these gainful operations. 

“There are ‘a natural price’, ‘a natural wages’, a 'natural 
order’ which human nature will discover for itself, and men’s 
'natural liberty’ will be simply the absence of any hindrance 
to this spontaneous action of human nature.” 2 

It is a broad humanitarian creed embedded in the whole 
system of moral philosophy, of which the Wealth of Nations 
was a single section. Free Trade is but one implication of a 
wider doctrine, in effect cosmopolitan. This code of nature, 
pre-Christian and non-theological in origin, was easily in¬ 
corporated as Providence or divine guidance by Christian 
theologians and philosophers. For our purpose here, the 
important point is that it furnished a sort of ethical and theo¬ 
logical defence for the economic individualism of a freely 
competitive system. The 'is’ of this system was reconciled 
with the ‘ought’, the actual with the ideal. 

1 Wealth of Nations, Book III, chap. IV. 

2 Bonar, p. 177. 


ECONOMIC AND ETHICAL VALUES 117 


When Political Economy had hardened into a specialised 
study in the hands of Ricardo and his disciples, the natural 
harmony, shedding its semi-mystical or divine nature, was 
incorporated in the rationalism of the utilitarian conception 
of society. Society was a mechanism of nice, accurate ad¬ 
justments, in which each cog or screw, or other bit, had its 
appointed, necessary, useful part to fill. Let each person in¬ 
form his mind, behave reasonably, and look after his own in¬ 
terests: a society of such persons, each successfully minding 
his own business, will be a successful society. 

This is individualism, a complete moral, economic, politi¬ 
cal doctrine. It seemed especially applicable to industry. 
The ‘invisible hand’ indeed was hardly needed, when all that 
was required was that the ordinarily intelligent man should 
put his labour, his hand, or his capital to its most gainful 
use, giving as little and taking as much as possible. Hu¬ 
man nature would stand for this without any imposed guid¬ 
ance. In this way economic resources as an aggregate 
would be utilised as productively as possible, the improve¬ 
ment of all the arts of production would be stimulated to the 
utmost, and the largest body of wealth would be distributed 
in due proportions among all who had unintentionally co¬ 
operated in its making. 

From the earliest launching of this doctrine there were 
qualms and questionings about the equity of distribution, 
but among utilitarian economists they were quenched by the 
reflection that distribution was regulated by natural laws. 
Fair minded exponents of this natural harmony were ready 
to admit that it did not work smoothly in economic society 
as it actually existed. Are all individuals in a position to 
know where their economic interests lie, and when they do 
know, are they always free to follow them? Does the free 
play of individual self-interest, as far as it is operative, 
necessarily make for the maximum wealth of the commu¬ 
nity ? The early classical economists were so well aware that 


118 ECONOMIC AND ETHICAL VALUES 


the society in which they lived did not conform closely to 
the conditions of a natural harmony, that, as political and 
social reformers, their main efforts were directed to the re¬ 
moval of the artificial obstructions which impeded the sys¬ 
tem of natural liberty. The needed reforms included a gen¬ 
eral spread of education, which should include some under¬ 
standing of economic opportunities and the discovery and 
improvement of personal aptitudes: the removal of legal and 
other barriers to the free mobility of labour: liberty to enter 
any trade or profession: free access to and utilisation of land 
and other natural resources: provision for the stimulation, 
security, and utilisation of savings by the development of 
savings banks, joint-stock companies, and other means of ob¬ 
taining a free flow of capital and its intelligent direction. 
The philosophers of laissez faire were convinced believers in 
the equitable productivity of this enlightened selfishness. 

It is, indeed, quite evident that, under certain conditions 
and within certain limits, this economy will work. Put a 
shipful of emigrants, with various skills and tools and ways 
of work, on to a new land, they will tend to settle down in ac¬ 
cordance with this theory, each finding that he can get most 
for himself by doing the work that is most useful for the 
community. Their children will find ‘openings’ along the 
same line of maximum utility, given equal intelligence and 
opportunities. Certain inequalities and other defects will 
doubtless disclose themselves. Some soils or situations will 
be better than others, and, if they are held as exclusive prop¬ 
erty, rent may emerge and a non-working owning class come 
into existence. The idleness or misfortune of some, the in¬ 
dustry or luck of others, may produce borrowers and lenders, 
and the latter may become a creditor class, also living with¬ 
out work. Excessive growth of numbers may stimulate a 
wasteful competition in the easier or more accessible occupa¬ 
tions. Certain rare skills of mind or hand will enable their 
owners to get high rewards for their services. 


ECONOMIC AND ETHICAL VALUES 119 


When a primitive community develops into a more highly 
organised community, with capital playing a large part, and 
labour massed under skilled entrepreneurs, and land owned 
by comparatively few, the defects of the system from the 
standpoint of natural harmony loom larger. But for the 
classical economist the presumption still held good that, 
even with the limitations and drawbacks thus evolved, the 
tendency was for every man to put his economic resources 
to the best social use. In more recent times the develop¬ 
ment of a marglnalist doctrine, representing the movements 
of minutely divisible units of capital and labor into busi¬ 
nesses and trades of maximum efficiency and productivity, 
has given an exacter meaning to the laissez faire economy. 
If this infinite divisibility and free mobility of all forms of 
capital and labour actually existed, they would guarantee a 
natural harmony which would impel everyone to do his best 
and get ‘what he was worth’. Unfortunately for this theory, 
concrete labour and capital are neither infinitely divisible nor 
freely mobile, while the structure and operations of modern 
industries are becoming less competitive. 1 

But it is not difficult to understand how the doctrine of a 
natural harmony, inspiring a policy of complete laissez 
faire, a free play of economic forces without political or other 
let or hindrance, satisfied the rationalistic humanitarian of 
the nineteenth century and stemmed the tide of ethical 
criticism which revolutionary socialists, or literary and ar¬ 
tistic idealists, brought against the working of the economic 
system. For the miraculous advances in manufacture and 
transport, due to the free application of science to the arts 
of industry, seemed to introduce an era of national prosper¬ 
ity, so great and so continuous as to secure a life of reason¬ 
able comfort for all the inhabitants of those countries able to 
avail themselves of the new economies, and by ever expand- 

1 For a fuller exposure of the defects of marginalism, see the author’s 
Free Thought in the Social Sciences, Part II. 


120 ECONOMIC AND ETHICAL VALUES 


ing commerce to spread the blessings of the new era in in¬ 
creasing measure throughout the habitable globe. 1 For 
though certain large perquisites of progress might be seized 
and held for a time by successful manufacturers and mer¬ 
chants, competition must compel them fairly quickly to hand 
down in lower prices to the general consuming public all but 
a fraction of the increased productivity of industry. Greedy 
landowners might, indeed, hold up both industrialists and 
the ordinary public by heightened rentals. This flaw in the 
natural harmony was recognised and reprobated by most of 
the economists. But the costs of factory sites and the com¬ 
pensation to landowners for sales to railroads and for min¬ 
ing rights could easily be met out of the immense gains of 
the new industrial order, while the injurious exactions from 
the incomes of the poorer classes for housing accommodation 
lay outside the purview of most economists, little concerned 
with what became of income when it passed to the con¬ 
sumer. The elaborate organisation of plant and labour in 
the factory system, the evolution of the railway and steam¬ 
ship systems, and of the mechanism of national and world 
markets and finance, conveyed to the mind of the economist 
so impressive an image of orderly exactitude as almost to 
eliminate the irregularities and defects in the operation of 
this vast economy. Reason and even justice seemed pre¬ 
dominant, for were there not laws of distribution plainly 
discernible, assigning to each the income which measured 
the worth of his individual contribution to the vast aggre¬ 
gate of wealth? 

§ 2. Although the earlier confidence in the economic sys¬ 
tem as a mechanical instrument for the production and dis¬ 
tribution of wealth by laws as natural as those operative in 
other spheres of nature was definitely shaken by the damag¬ 
ing admissions of J. S. Mill, who called into question, not 
only the humanity and equity of the operation of this sys- 
1 See Tennyson’s Lockesley Hall. 


ECONOMIC AND ETHICAL VALUES 121 

tem, but the immutability of its laws, the mechanical con¬ 
cept still remained as the basic principle in the presentation 
of economic science. Business life still remained an elabo¬ 
ration of fine and ever finer concrete adjustments, extending 
from the individual factory or workshop to the economic 
world conceived as a working whole. Even when a sub¬ 
jective political economy, presenting economic activities in 
terms of human efforts, desires, and wills, began to appear, 
the calculus employed in its exposition was essentially the 
same as that employed in purely physical processes of trans¬ 
formation. For (1), the unity of the human organism in its 
individual and collective forms, involving organic interac¬ 
tions between economic and other personal and social func¬ 
tions, was still ignored, or ruled out as an irrelevancy. 
(2) All desires, interests, and values were still treated as 
modes of a single undifferentiated stuff, expressible in units 
of that stuff, pleasure, pain, utility, satisfaction, happiness, 
or whatever name was assigned to it, and amenable as such 
to the measuring rod of money. That is to say, market 
value, price, remained the final criterion, even for an eco¬ 
nomics which professed to handle all the various efforts and 
costs, satisfactions and utilities, of human beings. (3) No 
serious recognition was accorded to the new teachings of the 
conscious control of the rational will of man over human in¬ 
stitutions and therefore over the ‘laws’ which regulate the 
working of these institutions, the most important outcome 
of ordered psychology in the field of the social sciences. 

The net effect of this survival of the dominion of the me¬ 
chanical concept was to cripple the progress of the new bio¬ 
logical conceptions of evolution as the main source of inter¬ 
pretation in economics. For though biological conceptions 
of growth had made some way in presenting an evolution 
of industry, and everybody was aware that transformations 
of the arts of industry and business organisation were taking 
place, the persistent tendency to regard these very processes 


122 ECONOMIC AND ETHICAL VALUES 


of change in terms of economic laws inherent in the economic 
subject-matter rather than as products of the purposes of 
man, preserved essentially intact the old mechanical do¬ 
minion. 

II 

§3. So long as wealth, alike in its concrete material 
nature and in its utility, was held to be reducible to some 
common denominator, and measurable in some single stand¬ 
ard, while the processes of producing and distributing it, and 
the very alterations in these processes themselves, were 
governed by laws derived from the immutable nature of 
things and men, the problem which concerns us here could 
not properly arise. I use the term ‘properly’, because it is 
quite evident that the real failure of the earlier humanitarian 
or ethical criticism of the economic system by nineteenth 
century thinkers was chiefly due to the conviction of busi¬ 
ness men and their economists, that it was as irrelevant to 
blame the economic system for its admitted barbarities and 
wastes as it was to blame nature for its greater apparent 
wastefulness in all her other inorganic and organic processes. 
It was mere foolishness to suggest that any other economy 
than that which operated ought to have operated. 

Not even when the conception of ‘a psychic income’ has 
been substituted for the material income of the early econo¬ 
mists does this irrelevancy necessarily disappear. For we 
might translate all economic income into terms of human 
satisfaction, and yet cling to the belief that all enlarge¬ 
ments or improvements in producing or distributing it were 
governed by laws that were not mutable by man’s reason¬ 
able will. And such a belief is sustained by all the intel¬ 
lectual influence attaching to the very concept ‘science’. 
Originating in departments of knowledge, where all dis¬ 
coverable laws are of an objective and immutable order, and 
where nature’s ‘art’, if any, was only discoverable in objec- 


ECONOMIC AND ETHICAL VALUES 123 

tive facts or behaviour, the term science, recently brought 
into the world of human behaviour, carried with it, quite 
naturally, those associations gathered in sub-human spheres. 
Brought into a sphere where the alien concept ‘ought’ not 
only thrust its presence, but claimed jurisdiction, the ‘natu¬ 
ral’ tendency of the science was to deny the existence of this 
‘ought’. If it could not maintain the full rigour of this 
denial, treating economic activities as mere ‘behaviour’, it 
could at least relegate the ethical demand, the ‘ought’, to a 
safe exterior position in which it operated, not to interfere 
with the scientific laws, but to apply emollients to their more 
painful implications. 

And this in effect has been the attitude taken by the main 
body of authoritative economists up to the present day. 
Some have, indeed, given a grudging admission to the power 
of human will to effect changes in the economic structure 
and activities, in the cause of human betterment, but they 
have regarded these changes as lying within the province 
of an economic art, dissociated from the rigours of a science 
which is irrevocably bound up to actual facts. 

§ 4. The distinctively moral doctrine of a natural har¬ 
mony was thus gradually altered into a scientific conception 
of the play of economic forces, in which spiritual direction 
was displaced by laws almost as immutable and as disinter¬ 
ested as those discoverable by physics, chemistry, or geology. 

I say ‘almost’, because even among the most rigorous school 
of determinism some play was given to the changing will of 
man as a determinant. But the general trend of the sci¬ 
entific economists was towards a science in which the mate¬ 
rials and forces of physical nature on the one hand, and the 
psychophysical human nature which handled these physical 
resources on the other, were governed by unalterable laws. 
This way of thinking belonged to the wider intellectual ambi¬ 
tion of bringing man in all his output and activities into a 
clearly ordered conception of the universe. In an age dis- 


124 ECONOMIC AND ETHICAL VALUES 


tinguished by pace and variety of material progress it ex¬ 
ercised a steadying influence upon the mind of man, checking 
the restive movements of humanitarians who chafed at the 
inadequacy of the share that came to the workers from the 
enlarging powers of production, and denouncing the futility 
and waste of all attempts to interfere by legal or trade union 
action with the laws regulating the distribution of wealth. 

Though the early rigour of this scientific attitude was miti¬ 
gated later on, and the iron law of ‘wages’, the wage-fund 
theory, and other bulwarks of hard-shell determinist doc¬ 
trine disappeared, a sharp conflict continues to be waged 
between the descendants of the classical school of economists 
and rational reformers as to the relative part of the immu¬ 
table and the mutable in economic processes. The former 
lay stress upon the fixed character of ‘natural resources’, the 
fertility, position, climate, etc., of usable lands and waters, 
on the one hand, the permanent character of the main hu¬ 
man needs, capacities, and motives and social institutions 
which enter into or influence economic processes, upon the 
other. 1 The latter, relying upon the intellectual and moral 
educability of ‘human nature’ in its bearing upon the arts 
of production and consumption and in the growth, selection, 
and distribution of population, question the fixity of eco¬ 
nomic law in all its applications. The quantity of land for 
any economic purpose is not fixed, nor is its fertility or its 
relative position. Even climate is not unalterable. The 
growing control over nature by the application of the physi¬ 
cal sciences can be accompanied by a not less significant con¬ 
trol over human nature by psychology and hygiene. Po¬ 
litical, legal, and other social institutions may become far 
more rapidly modifiable: the deepest rooted motives may be 
altered in the actual operation by education, selection, re- 

1 For an excellent summary of these factors under the heads, 
‘Natural’, ‘Social’, ‘Human’, see Sir J. Stamp’s The Christian Ethic as 
an Economic Factor, p. 27. 


ECONOMIC AND ETHICAL VALUES 125 

pression, combination. While then we may still hold that 
certain important factors in the operation of the economic 
system, physical and human, are for any immediate pur¬ 
poses to be regarded as ‘fixed’ and operable by relatively 
fixed laws, an ever increasing part is played by the intel¬ 
lectual and moral powers of man subject to his changeful 
purposes, and acting upon ‘nature’ so as to alter the economic 
significance of many of those characters that are most fixed. 

Thus the barriers set against the social control of economic 
processes by human intelligence and will are continually 
being weakened. Economic laws do not disappear, but their 
application to economic situations is continually changing, 
as the physical factors that seemed to give them immutabil¬ 
ity are found modifiable in their economic bearing by psychi¬ 
cal factors which carry a creative spirit. This new attitude 
towards the interpretation of the economic system has a 
special bearing upon the problem of the claim of ethics to 
exercise a suzerainty over economic processes. For if, as 
we hold, the real problems of modern economics are mainly 
the control of economic resources by the intelligent will of 
man, economics, as art, becomes a branch of human conduct. 
This creed demands a change in the conception of an eco¬ 
nomic science, not in the sense of a direct subordination to 
ethics, but as involving a recognition that every operative 
‘ought’ is an ‘is’, and must be taken account of in any analy¬ 
sis of economic facts and forces. 

In other words, human conduct differs from every other 
known sort of organic conduct in that the operative units 
entertain, and are immediately influenced in their activities 
by advance images of ‘the desirable’, termed ideals. The 
drive or urge towards these ideals is an ‘ought’. Seeing that 
these ideals and this feeling of ‘ought’ (the moral or human 
craving) are more and more potent factors in the economic 
conduct of to-day, the disposition to deny the term ‘norma¬ 
tive’ to economic science, or to draw tight limits to its ap- 


126 ECONOMIC AND ETHICAL VALUES 

plication, is an obstructive procedure which hampers the 
progress of a social science. It is quite unnecessary, in press¬ 
ing for due recognition of this 'ought’, to open up the meta¬ 
physics of free will, or to consider what precise validity at¬ 
taches to such a term as 'self-determination’. For our pur¬ 
pose this 'ought’ figures in economic science as a factor of 
growing importance in those operations of desire and will 
that impel economic activities, and the exploration of the po¬ 
tentialities of that 'ought’, in guiding economic conduct and 
moulding economic institutions, gives new significance to an 
economic art, as to every other social art. 

It will, doubtless, be contended in some quarters that 
where a sense of moral obligation, an ought, or any other 
recognition of the desirable, actually enters into the economic 
sphere as a motive in determining economic action, the mod¬ 
ern economist is prepared to give due recognition to it, and 
actually does so, when its influence is made manifest and 
measurable. In other words, when the objectively desirable 
transforms itself into 'the desired’, into terms of current con¬ 
scious satisfaction, it is brought within the measuring rod of 
money, along with the other satisfactions that enter into 
price determination. In that sense, and to that extent, mod¬ 
ern economic science takes account of ethics. Economic wel¬ 
fare thus includes elements of ethical or human welfare. 

This seems to bring us to the dividing line disclosed in an 
interesting controversy between Professor Pigou and Mr. 
R. C. Hawtrey. The exact position of this line is best seen 
by reverting to our earlier analysis, and marking the earliest 
positions taken as to the relations of Political Economy to 
Ethics. In this distinctively materialistic science no attempt 
is made to go behind the concept of material measurable 
wealth, as valued by money, the laws of the productive ex¬ 
change and distribution of that wealth, consumption rank¬ 
ing as a process subordinate to production. Here no formal 
contact with ethics is established. This is, in effect, an ex- 


ECONOMIC AND ETHICAL VALUES 127 

tension of physics and biology to a special branch of human 
behaviour. The next position (next in logic, though not al¬ 
together in time) is that when the application of utilitarian 
hedonism sought to resolve wealth into 'utilities’, or conscious 
satisfactions, bringing into play the reactions upon a given 
body of wealth effected by the terms of its distribution and 
consumption, and to some slight extent its production. Dr. 
Pigou s is a position somewhat in advance of this, in which 
wealth is formally resolved into the welfare involved in its 
utilisation or consumption, that welfare being measurable in 
terms of some general desiredness and incorporating such 
measure of the objectively desirable, the ethically 'good’, as 
is found m the actually desired. Then comes along Mr. 
Hawtrey, pointing out what is incontestable, that what men 
actually desire differs sometimes widely from what they 
would desire if they knew and willed what was best for them, 
the ideally desirable. Mr. Hawtrey expounds at length 1 a 
thesis more briefly indicated in a brochure by Mr. J. M. 
Keynes, 2 and it is not without significance that the most ad¬ 
vanced movement towards a recognition of the subordination 
of economics to ethics should, in England, come from leading 
experts in that branch of economic study where the subject 
matter is most abstract, viz., finance. Taking Pigou’s defini¬ 
tion of economic welfare as "that part of social welfare that 
can be brought directly or indirectly into relation with the 
measuring rod of money”, Mr. Hawtrey points out that, if 
consumers’ actual preferences are, as is the assumption, taken 
as determining the economic welfare attached to purchas¬ 
able goods, and that welfare is a part of Dr. Pigou’s "social 
welfare”, the latter term is also confined to the criterion of 
the actually desired, as distinct from the desirable. Thus, 
though Dr. Pigou avowedly envisages his welfare in terms of 
'satisfaction’ rather than of the vaguer 'utility’, that satis- 

1 The Economic Problem, chap. XVI. 

2 “The End of Laissez Faire”. 


128 ECONOMIC AND ETHICAL VALUES 


faction “remains an abstraction from the consumer’s prefer¬ 
ences”. In other words, the human welfare, of which it is a 
part, either remains on the plane of human desiredness, or 
else it assumes in the individual “a disposition to prefer the 
greater good” which virtually identifies ‘desired’ and desir¬ 
able’. Now welfare, as Mr. Hawtrey contends, should if 
possible be identified with real good, and the preferences 
displayed in economic conduct are no sufficient indices of 
this welfare. We would not go so far with him as to main¬ 
tain that “the consumer’s preferences have a very slight re¬ 
lation to the real good of the things he chooses”, but we may 
accept his judgment, “We are compelled to give up what has 
been from the very start the leading idea of economists, the 
idea of a measurable aggregate of economic welfare which 
forms a constituent of welfare as a whole.” 1 Current eco¬ 
nomics, so far as it is psychological, deals with current satis¬ 
factions. Now “The aggregate of satisfactions is not an ag¬ 
gregate of welfare at all. It represents good satisfactions 
which are welfare and bad satisfactions which are the re¬ 
verse.” Therefore, and this is his conclusion, “Economics 
cannot be dissociated from ethics.” 

The controversy is thus locked. Supporters of Pigou con¬ 
tend that, if we introduce distinctively ethical criteria, we 
land ourselves in a region not merely outside measurable 
facts, but outside agreed facts. This is clearly put by Mr. 
Lionel Robbins. 2 “It is not because we believe that our 
science is exact that we wish to exclude ethics from our 
analysis, but because we wish to confine our investigations 
to a subject about which positive statement of any kind is 
conceivable.” “So long as we confine ourselves to the in¬ 
vestigation of what is, or what can be, the deficiencies of 
economics are the result of the deficiencies of economists. 
But as soon as we include investigations of what should be, 

1 Op. cit., p. 184. 

2 Economica, June, 1927. 


ECONOMIC AND ETHICAL VALUES 129 


we are embarked on speculations whose very nature no phi¬ 
losopher since the beginning of time has succeeded in making 
clear.” 

In a word, the measuring rod of money may sometimes be 
badly or erroneously applied, but it does yield results which 
a science of economics may recognise as facts, something that 
is. We had, therefore, best confine ourselves to the sorts of 
satisfactions that are measurable, and have no truck with 
satisfactions that not merely are immeasurable but are of 
varying appeal to different persons or to the same person at 
different times. For Mr. Robbins apparently denies that 
for ethics there are either facts or any substantial agree¬ 
ments upon standards of values. Others may not go so far 
as this. But economists will generally be in agreement with 
him in preferring to keep their science within the sphere of 
actual behaviour and measurable motives and satisfactions. 
In effect this is a refusal to recognise any real modus vivendi 
or contact between economic values and ethical values. If 
it does not declare for the complete autonomy of economics, 
the relations it permits between economics and ethics are 
hardly more than those of a bowing acquaintance. There 
may be some loose assumption that economic prosperity is, 
upon the whole, conducive to ‘a good life’, in the sense of 
Aristotle’s admission that one must first have a livelihood, 
then practise virtue, but no correlation of economic and hu¬ 
man values can be admitted. 

§ 5. This brief survey of a deep-rooted and entangled 
controversy ought to make it evident that for our purpose of 
relating economic to human values, the demand for complete 
autonomy for economics cannot be entertained. We cannot 
admit as the objective of economic activities either the yield 
of material goods which these activities produce, or the ‘psy¬ 
chic income’ which they yield as assessed in terms of cur¬ 
rent deservedness or satisfaction, without reference to their 
intrinsic desirability. Mere wealth in a community, as esti- 


130 ECONOMIC AND ETHICAL VALUES 


mated by increased quantity of goods, might involve reduced 
utility or satisfaction, reduced psychic income, by reason 
either of its worse apportionment, or of the more arduous 
labor of producing it. A larger ‘psychic income’, expressed 
in terms of current desires, is subject to the wastes and dam¬ 
ages of currency debasement, that is to say the errors and 
depravities of taste and appetite. A material or a psychic 
income may contain ‘illth’ as an alloy to its ‘wealth’. More¬ 
over, when you once throw over the material test for that 
of conscious satisfactions you are confronted with two sets of 
difficulties: first, that of applying some common standard 
of valuation to the satisfactions of A. and B.; second, that of 
keeping economic satisfactions separate from other satisfac¬ 
tions, not distinctively of economic origin and nature, which 
they affect or are affected by. 

Two courses remain for our consideration. Shall we, pre¬ 
serving our separation of economic from other human activi¬ 
ties as the basis of a separate study, seek to humanise that 
study by giving due place to ethical factors alike in the sci¬ 
ence and the art of industry, and subjecting the distinctively 
economic actions at every step to ethical criteria? Or shall 
we frankly acknowledge that the separation of the economic 
from other departments of personal and social activity, as 
the subject matter of a science or an art, is a mistake which 
can only be rectified by subsuming economics under ethics 
or the general study of humanity, or what ever title be given 
to the science and art of human conduct. 

This issue, though nearly related to, is not identical with 
that raised originally by Gomte, and later by other sociolo¬ 
gists, whether there can rightly be said to exist a science of 
Political Economy within the all-embracing science of sociol¬ 
ogy. For most of those who plead the omnicompetence of 
sociology continue to regard this as a distinctively positive 
science, in a sense which excludes the supremacy that in our 
discussion is accorded to ethics as the science and art of hu- 


ECONOMIC AND ETHICAL VALUES 131 

man welfare. A purely evolutionary view of social develop¬ 
ment and institutions viewed as mere process, with purpose 
either unrecognised or kept in the background, could not do 
otherwise. For it is only when, as in Professor Hobhouse’s 
great work, 1 purpose with an increasingly moral significance 
is recognised as the vis motrix in social evolution, that we are 
able properly to envisage a unified social science and art, 
which can take for their subject matter the whole scope of 
human conduct regarded from the standpoint of welfare or 
value. 

But some points of interest for us are discernible in the 
long and sometimes acrimonious controversy over the legiti¬ 
macy of a positive separate science of Political Economy. 
Here, however, we must refuse to be drawn aside into 
another controversy which, especially in Germany, got en¬ 
tangled with the first, viz., the relative merits of the theoreti¬ 
cal and the historical methods. For this latter controversy 
has no special application to the question of the proper rela¬ 
tions of Political Economy to Sociology, and although the 
historical method doubtless stresses the interrelations be¬ 
tween the various special studies (sciences or not) which 
make up sociology, it cannot settle the issue of the utility, 
and therefore the validity, of treating economics, or politics, 
or law, or any other department of conduct, as if it were 
separate from the whole. For the legitimacy of the abstrac¬ 
tions needed to support a separate theory of Political Econ¬ 
omy, the ‘as ifs’ of an ‘economic man’, a free competition, an 
infinite divisibility of the factors of production, etc., ulti¬ 
mately turns, not on the question how far these abstractions 
correspond to concrete economic experience, but how service¬ 
able they can make themselves in putting intelligible order 
into this experience. It is just the question of serviceability 
that has always divided the unified sociologist from the spe¬ 
cialised sociologist, as economist, political scientist, or other. 

1 Development and Purpose. 


132 ECONOMIC AND ETHICAL VALUES 


The Comtist position was avowedly based upon the view 
that the phenomena of society were so complicated in their 
relations, and the various aspects and activities so inter¬ 
twined, that any attempt to present a separate economic or 
industrial analysis of society was foredoomed to failure. In 
a later generation this view found expression in Dr. Ingram’s 
article on Political Economy, contributed to the 9th edition 
of the Encyclopedia Britannica, where, after an exposition 
of the science as developed in England, he concludes that 
“The one thing needful is not merely a reform of political 
economy, but its fusion in a complete science of society.” 

This is a different position from that taken by the school 
of Roscher and Knies which came to the fore in Germany in 
the mid-nineteenth century. 

“The school explicitly calls itself ethical; it regards politi¬ 
cal economy as having a high ethical task, and as concerned 
with the most important problems of human life. The sci¬ 
ence is not merely to classify the motives that prompt to eco¬ 
nomic activity; it must also weigh and compare their moral 
merit. It must determine a standard of the right production 
and distribution of wealth, such that the demands of justice 
and morality may be satisfied. It must set forth an ideal 
of economic development, having in mind the intellectual 
and moral, as well as the merely material, life; and it must 
discuss the ways and means — such as the strengthening of 
right motives, and the spread of sound customs and habits in 
industrial life, as well as the direct intervention of the State 
.— by which that ideal is to be sought after.” 1 

This view conforms to the former of our two alternatives. 
While accepting ethical standards of reference for the evalu¬ 
ation of economic activities and for the direction of economic 
conduct, it does not contemplate the merging of economic 
science in a general science of ethics or in a sociology, but re¬ 
tains the specialist spirit and method in the study of the 

1 J. N. Keynes, Scope and Method of Political Economy, p. 20. 


ECONOMIC AND ETHICAL VALUES 133 

phenomena of economic life. It may be difficult, perhaps im¬ 
possible, to maintain this attitude in face of the constant ob¬ 
ligation to value economic motives and actions by a stand¬ 
ard that is external and of superior validity. In other words, 
it may be difficult to pump ethics into economic life, without 
absorbing the latter into the former regarded as the arbiter 
of human conduct and the assessor of human welfare. But 
such was the attempt, and the degree of its utility or practi¬ 
cability remains for our consideration when we have taken 
due account of the alternative. 

The virtues rightly claimed for this school are a superior 
realism, the beings whose activities it studies being far 
richer in humanity than even the more liberal renderings of 
The economic man’ by classical theorists, a closer associa¬ 
tion of economics with the other social sciences and arts, and 
a keener recognition of the mutability of economic doctrines 
in accordance with varying conditions of social life. 

This discussion of diverse and competing methods of treat¬ 
ment is apt to overestimate the discordant elements, and to 
present our problem as insoluble. Having dismissed the ma¬ 
terialistic and the ‘psychic income’ conceptions of the eco¬ 
nomic objective as fundamentally defective for the purpose 
of any human evaluation, we seemed to be landed with the 
alternatives of attempting to preserve a distinctively eco¬ 
nomic field of study into which ethical concepts and valua¬ 
tions continually trespass, or else of dissolving economics al¬ 
together into an all-embracing ethics or humanism. But 
there are ways of avoiding these over-logical predicaments, 
by taking what we would call a more practical and common- 
sense view of the situation. The modern attitude of the 
statesman, the philanthropist, the enlightened business man, 
the social reformer, is everywhere moving away from ma¬ 
terial monetary estimates in the handling of those social 
problems which still primarily present themselves as ‘eco¬ 
nomic’. All of them come half-consciously to disregard the 


134 ECONOMIC AND ETHICAL VALUES 


narrow specialisms into which social scientists endeavoured 
to carve up their science. Insensibly, the dominant concep¬ 
tion of the conditions of organic unity is coming to prevail. 
Every important social problem is coming to be recognised 
as containing economic, political, moral, hygienic, and other 
factors related in the life of a human organism. This is not, 
as might seem, merely the triumph of biology. For though 
the terms 'organism’ and 'organic’ are commonly for con¬ 
venience adopted for discussing the relation of the parts to 
one another and to the whole, the issue far transcends biol¬ 
ogy, passing below into the new physical conceptions of the 
structure and behaviour of the units of matter, upward into 
the issues which in politics and ethics gather round personal¬ 
ity, community, and federalism. For philosophers nothing 
less than a new conception of the structure and operation of 
the universe is involved, or perhaps the scrapping of the con¬ 
cept structure in any static sense and the envisagement of 
the whole 'affair’ in terms of discontinuous activities. 1 Not 
a few of them admit that this new view not only tends to 
break down the divisions between the sciences, but to pre¬ 
sent an attitude with which science as such is not qualified to 
cope. For modern science has been disposed progressively 
to eliminate 'force’, urge, activity, causal efficiency, and pur¬ 
pose from its realm. It does not require these concepts and 
cannot work with them. But precisely on this account it 
disables itself from any other than a mechanical or analytic 
treatment of an organism. It can neither handle an or¬ 
ganism as a structure, nor as the system of activities in which 
an organism expresses itself. "The concept of the organism, 
then, is best regarded as a philosophical concept proper to 
the domain of the philosophy of science, but in no sense a sci¬ 
entific hypothesis.” 2 

1 Prof. Whitehead’s Science and the Modern World contains an ex¬ 
position of this doctrine. 

2 Joseph Needham, Organism in Biology, Journal of Philosophic 
Studies, Jan., 1928. 


ECONOMIC AND ETHICAL VALUES 135 

Now this new tendency to assimilate all ‘wholes’ or unitary 
systems, from the atom to the universe, mental as well as 
physical wholes, to the structure and behaviour of an ‘organ¬ 
ism’, and to see them all as systems of interacting parts with 
internal interrelations, on the one hand, and external inter¬ 
relations with other similarly constructed wholes, upon the 
other, is exceedingly germane to our thesis. For it estab¬ 
lishes the inseparability of the economic activities in men, or 
groups of men, from the other activities which these organic 
beings display in all operations concerned with the produc¬ 
tion and utilisation of economic or marketable goods. Not 
merely do economic and non-economic activities incessantly 
interact in every process, but the ‘good’, or ‘satisfaction’, got 
out of any set of activities can only be interpreted in terms 
of the organism as a whole. 

Yet such an extension of organism is liable to lead astray, 
if it conveys the notion of too rigorous a system, too tight a 
whole. It must be able to assimilate the idea of parts which 
belong to one organism to-day, another tomorrow, organisms 
where the central control is dominant and yet where a large 
measure of freedom is accorded to the parts, of systems within 
systems, and systems formally complete which impinge upon, 
affect, and are affected by other systems, either similar or 
dissimilar in character and function. 

§ 6. Perhaps we get closer to our specific problem if we 
approach it, not by the term, “organism”, but by the more 
distinctively political term “federalism”. For the history of 
federalism confronts us with virtually the same alternatives 
with which we are here engaged in our attempt to decide 
whether, or how far, economics can do its work properly as a 
separate special study, science, or art, or must be regarded as 
an aspect or factor of the general study of humanity. Fed¬ 
eralism assumes at once a certain unity and a certain diver¬ 
sity of interests and powers, and presents a constitution in 
which these two opposed principles of autonomy and central 


136 ECONOMIC AND ETHICAL VALUES 


government are reconciled. That reconcilement takes vari¬ 
ous shapes, according to the measure of paramountcy claimed 
for the federal government, and depends largely upon whether 
the arrangement is reached by devolution of specific powers 
from the central power, or, reversely, by the cession of spe¬ 
cific powers by the several states to the federal government. 
“How far is social science, or social philosophy, a federal sci¬ 
ence or a federation of sciences?” is perhaps the form our 
question should take. Answers will vary largely in propor¬ 
tion as the sciences and arts concerned are regarded as norma¬ 
tive as well as factual. Where, as with the early economists, 
the tendency was to isolate economic from other processes, 
and to formulate the laws by which such economic processes 
operated, the unity of the social sciences was a loose federa¬ 
tion of substantially autonomous bodies, with social philoso¬ 
phy as a sort of brooding over-thought. But when norma¬ 
tive or ethical principles are brought into direct contact with 
economic processes, not only as participant motives, but as 
criteria, the older autonomy is evidently weakened, and we 
approach a system which is nearer to a federal state than to 
a federation of states. 

If under such conditions it be asked: does Economics sur¬ 
vive as a ‘separate science’? the answer will depend upon the 
meaning given to the two words respectively. Under the 
subordination of economics to ethics here envisaged, there 
will remain plenty of specifically economic work to be done, 
both descriptive and interpretative, in those fields of indus¬ 
try, commerce, and finance, which have always occupied the 
chief attention of economists. The economic system, as an 
objective structure for the production and distribution of 
marketable goods and services, may thus be studied as a go¬ 
ing concern, and made the subject of statistical measure¬ 
ments. But as enquiries proceed from the standpoint of 
social psychology into the organic interplay of activities and 
motives in the life of human communities, the pragmatic 


ECONOMIC AND ETHICAL VALUES 137 

value of a separate science whose abstractions violate the 
fundamental principles of organic unity in human beings 
will continue to be more heavily discounted. And in prag¬ 
matic value we here include intellectual value. For ob¬ 
viously to isolate these organic interrelations as a single set 
of human activities, in order to make them the subject matter 
of a separate science, when more and more both the ordinary 
experience of life and the sense of conduct in man testify to 
the ever closer contacts between the business or working life 
and other activities and interests, moral, political, educa¬ 
tional, hygienic, and ‘social’ in the looser sense of that term, 
must present itself as less and less defensible. This growing 
sense of unity in life and conduct is, therefore, bound to exer¬ 
cise a dissolvent influence upon economics as a separate sci¬ 
ence and art. It will become a group of studies whose direc¬ 
tion will more and more be exercised by and in the interest of 
social philosophy, its intellectual and practical utility sub¬ 
ordinated to the wider study embracing the whole of human 
conduct, and imposing its standard of valuation upon each 
specific activity. 







PART THREE 

THE ETHICS OF ECONOMIC LIFE 


CHAPTER I 

ETHICS OF PROPERTY 

§ 1. So far we have been engaged in the task of endeav¬ 
ouring, first, to secure as definite and agreed a connotation as 
is possible for the terms human welfare and human values, 
and, secondly, to consider how the wealth, welfare, and 
values, which 'Economics' in its various phases of develop¬ 
ment recognises, comport themselves before these human 
criteria. Our main concern, however, is not with economic 
theory, but with the actual working of economic processes 
and institutions, or, in other words, with the operative eco¬ 
nomic system. A survey of that operative system as a 
whole, and a closer consideration of some of its essential pro¬ 
cesses from the humanist or ethical standpoint, will occupy 
the greater part of these pages. 

But before entering on this task, it seems necessary to ap¬ 
proach the tangle of concepts and sentiments that attach to 
a definitely economic institution which so far has not figured 
prominently in our enquiry, viz., property. For until we get 
a clear conception of the part which property should play in 
human personality and society, we can hardly hope to bring 
intelligent, disinterested thinking to bear upon the economic 
activities from which property emerges and in which prop¬ 
erty functions. The very fact that no other economic term 
is so suffused with moral feeling is a sufficient reason for our 
exploration. 

§ 2. There is no known condition of man where personal 
property, in the sense of an exclusive use and enjoyment of 
certain things, did not exist. Such information as is avail- 
141 


142 


ETHICS OF PROPERTY 


able regarding the most primitive forms of human grouping 
attests a recognition of a ‘right’ to personal property by mem¬ 
bers of the group. Such articles of property usually con¬ 
sist of clothes, tools, weapons, ornaments, the family hut or 
hole (or some fixed part of it), and food in the hut. Here 
is Dr. Seligman’s inventory of the personal estate of a 
Yedda. “One axe, bow and arrows, three pots, a deer skin, 
a flint and steel and supply of tinder, a gourd for carrying 
water, a betel pouch containing betel covers, and some form 
of box for holding lime, also a certain amount of cloth be¬ 
sides that on the person.” 1 

Next, as to land. In primitive society land may be com¬ 
munal or private, or a blend of both, that is to say, temporary 
private and permanent common ownership. Or land once 
held in common may become private property, either by 
breakup of the kindred or community, or by new require¬ 
ments of cultivation. If a man clears and tills an unused 
piece of land, it may become ‘his’ by consent of the chief or 
the community. Various forms of such qualified owner¬ 
ship, tenure, are found, sometimes subject to rights of an 
overlord, or of the community. Sometimes there is periodic 
redistribution, as in the old Russian mir. Where there 
is individual hunting or fishing, the catch is usually the prop¬ 
erty of the hunter. 

The rationality and equity of such forms of private prop¬ 
erty are almost universally recognised. A man rightly ‘ap¬ 
propriates’ these things. This ‘right’ may be said to be of 
double nature. In the first place, he may be said to have 
‘made’ these things, in the sense that he has ‘mixed his 
labour’ with them, and so given them use-value. Secondly, 
the fact that he has done this carries a presumption that he 
can ‘use’ them for some personal need or enjoyment. Locke, 
indeed, limits private property by this condition of utilisa¬ 
tion. 

1 Property: Its Duties and Rights, p. 11. 


ETHICS OF PROPERTY 


143 


“As much as anyone can make use of to any advantage of 
life until it spoils, so much he may by his labour fix, and 
property in whatever is beyond this is more than his share 
and belongs to others.” 1 

Origin and use are thus naturally related. A man makes 
his coat to his own fit and taste and need, so with his tools 
and other personal belongings: no one else could get so much 
use out of them. The piece of land nearest his hut is natur¬ 
ally worth more to him than to another. Such property is 
doubly ‘appropriate’. 

Here there emerges as a basis or principle of property what 
may rightly be designated a Natural Law, i.e., a code of cus¬ 
tom or behaviour rooted in lasting conditions of human 
nature and its environment. 

But even in a primitive community such rights of private 
property will be subject to two limitations, one relating to 
origin, the other to use. The right to own what he has 
“mixed his labour with” must be limited by the similar rights 
of others, where the material into which such labour can be 
put is itself limited. Where the supply of good land is 
limited, no man must be allowed to cultivate more than his 
‘proper’ share. Homestead laws carry this restriction up to 
modern times. The claims of gold diggers are subject to a 
similar economy of rights. So with the ‘use’ of any natural 
resource, a spring or river, forest or pasture, exclusive rights 
of property are not entertained. There can be no ‘natural 
right’, in Locke’s sense, to superior natural opportunities. 
Monopoly and rent are ruled out ab initio. 

§ 3. Although such customary rights of property grew up, 
partly as adjustments of competing personal claims, partly 
in virtue of community feeling, without any conscious can¬ 
vassing of rights and equities, we are none the less justified 
in tracing in them, as their underlying principle, a dawning 
conception of property as an instrument in the development 
1 Civil Government, chap. V. 


144 


ETHICS OF PROPERTY 


of personality. Dr. Bosanquet thus expounds the Hegelian 
service of property. 

“In property my will takes the shape of a person. Now a 
person is something in particular: therefore the property is 
the personification of this will. As I give my will existence 
by means of property, property in its turn must have the at¬ 
tribute of being this in particular, i.e., mine.” 1 In simpler 
words, I cannot realise myself adequately as a person, unless 
I have allotted to me some bit of the world to do it in and 
with. 

But if private property is justified and rationalised by its 
contribution to personality, two conditions seem to follow. 
First, every person has a right to acquire property, and a 
social order which fails to secure this right for all is con¬ 
demned. This does not signify that everyone must actually 
possess property, for to that possession two conditions, as we 
recognise, are attached, first, that he contributes labour to 
its making, second, that he is capable of utilising it. The 
wilfully idle man has no claim upon his society to provide 
him with property, which is of some one else’s making, and 
which he cannot put to a good use. But everyone has a right 
to the opportunity of acquiring such property, though, as we 
shall presently discover, not necessarily a right to 'equality 
of opportunity’. Secondly, no one has a right to acquire or 
possess property, excessive in amount, or damaging in the 
conditions of its making or its utilisation, such property be¬ 
ing injurious to the personality of its owner, and usually to 
the personality of others, stinted of their proper share, or 
otherwise oppressed by the power of an economically stronger 
person. 

Now the evolution of all modern civilised societies has 
notoriously failed adequately to conform to either of these 
sound conditions, relating property to personality. The dis- 

i Civilisation of Christendom , p. 327. See also his essay in Prop¬ 
erty, p. 61. 


ETHICS OF PROPERTY 


145 


tribution of the opportunities to acquire property has almost 
everywhere contravened both aspects of the ‘natural right’. 
Most men are not able by ‘mixing their labour’ with natural 
resources, or the product of such natural resources, to acquire 
sufficient property to develop this personality in accordance 
with the demands of modern life. A few are able, either 
without labour, or by a disproportionately small amount of 
labour, to possess an amount of property greater than they 
can, or do, utilise in the development of their personality. 
This seems a pompous way of expressing the related defects 
of poverty and luxury, the familiar results of a failure of 
the natural law of property to function effectively in a de¬ 
veloped economic system. 

But it is worth while trying clearly to realise how the 
equities and utilities of property, as they appear in a primi¬ 
tive society, have been shed by modern conditions. When 
a man used the things he made, his food, his clothes, his 
tools, or hut, both labour and use, production and consump¬ 
tion, were closely attached to the same personality, or, taking 
a more realistic view, to the same family group. Modern 
conditions of industry have visibly and progressively sun¬ 
dered the two aspects of personality, the producer and con¬ 
sumer. Seldom, if ever, can an individual in modern times 
make the whole of any thing, and seldom does he use or en¬ 
joy the thing he has made or helped to make, except so far as 
relates to the surviving minor activities within and around 
the home. He contributes to the making or moving of great 
quantities of some single sort of salable things, and he uses 
an immense variety of things which innumerable other un¬ 
known persons have made. 

This severance of the personality of everyone on its eco¬ 
nomic side into a specialised producer and a diversified con¬ 
sumer is a breach of the simplicity of the natural rights of 
property so serious as to have transformed both the nature 
of property itself and the attitude of the modern mind to- 


146 


ETHICS OF PROPERTY 


wards it. Even when we are dealing with the sorts of prop¬ 
erty which are still most personal in their use, food, clothing, 
house, and furniture, the fact that on none of them, in all 
probability, have we stamped the impress of our own labour 
involves a subtle change of sentiment from that attaching to 
things which were the embodiment of our personal skill and 
effort. 

But still more important is the fact that, for the modern 
owner of property, that property has ceased to be concrete 
and tangible, with the exception of landed property which 
still remains ‘real’. It is either conceived in general terms 
as purchasing power, a general command over all sorts of 
goods and services, or else more commonly as monetary liens 
upon remote instruments of production held in association 
with other capitalists, none of whom has a particular sepa¬ 
rate claim upon any single bit of the property, railway, mine, 
factory, or other plant in question. The modern man of 
property has seldom touched or seen any piece of the con¬ 
crete wealth of which he is joint owner. It means nothing 
to him except in terms of abstract economic value. His 
property is something that yields him income, which he may 
or may not convert into concrete tangible goods for his per¬ 
sonal use or enjoyment. This is what modern capitalism 
has done to property. The core of capitalism is its financial 
technique, i.e., the bookkeeping concept of capital as “a debt 
owed by a business concern to its proprietors”. This has 
rationalised business by depersonalising it. The term “so- 
ciete anonyme” is even more expressive of its nature than 
the terms joint-stock company and corporation, respecting 
which the familiar jest that “it has neither soul to be saved, 
nor body to be kicked” has deep ethical significance. For 
though the operation of these capitalist instruments means 
much for weal or woe to their human operators, and to the 
whole world of producer-consumers, in which they operate, 
their legal economic owners have no effective personal re- 


ETHICS OF PROPERTY 


147 


sponsibility for these influences over human welfare exercised 
by their property. This divorce between property and re¬ 
sponsibility is made more absolute by the terms under which 
an ever-increasing quantity of investment is conducted. 
Trust and investment corporations finally dispose of any 
scruples which the investor might entertain in selecting the 
channel of employment for his money, as regards the utility 
or human services rendered by the business into which his 
money flows. The modern owner of property is often un¬ 
aware whether he is engaged in the liquor trade, in the rack- 
renting of city slums, or in the conduct of some sweated in¬ 
dustry. Anonymity and indirectness are effective screens. 

§ 4. The first property in ‘capital’ was the extra food 
grown and saved for leisure in which to make the first tool, 
the tangible visible product of the personal effort of the 
owner-user. 1 Modern property in capital, detached en¬ 
tirely from the personal control of savers, becomes a natural 
force, leaping barriers of time and space, existing eternally 
in interest-earning assets incorporated now in this industrial 
material form, now in that, moving freely from place to 
place in the economic system, and passing from one owner 
to another by sale, gift, or inheritance. It is economic 

1 Biology finds a still earlier origin for capital. “The tendency to 
save something from one meal to tide over the interval between it and 
the next is as old as the evolution of living things. In simple unicellu¬ 
lar animals, such as the amoeba, certain granules are stored in the 
body; these granules we may truly regard as savings—food or fuel 
which the amoeba will presently utilise. When we pass a step higher 
in the scale, to a stage where the progeny of a single cell, instead of 
separating and leading lives independent of each other, remain clus¬ 
tered together, so as to form a society of microscopic units, a state 
represented by sponges, we find the saving habit is still preserved, 
especially by certain individuals. As we ascend the scale still further, 
and to a stage where the society of cells has become so united that we 
speak of the community as a single animal, we find that there is one 
kind of cell which has acquired the saving habit much more than any 
of the others — namely the cells of the female body which are to 
serve the purpose of procreation”. (Sir Arthur Keith, Man's Origin, 
P- 51.) 


148 


ETHICS OF PROPERTY 


power in its most abstract form, capable of materialisation 
for a period in any chosen specific shape. The interest it 
‘earns’ for its owner releases him pro tanto from all obligation 
of current labour. 

This realisation of property in terms of power is well ex¬ 
pressed by Professor L. T. Hobhouse. 1 

“Thus, while modern economic conditions have virtually 
abolished property for use — apart from furniture, clothing, 
etc., for the great majority of the people—they have brought 
about the accumulation of vast masses of property for 
power in the hands of a relatively narrow class. The con¬ 
trast is accentuated by the increasing division between 
power and use. The large landowner stood in some direct 
governing relation to his estate. Responsibility went with 
ownership, and even survived the explicit association be¬ 
tween land tenure and political functions. The capitalist 
employer who began to be differentiated from the workman 
in the earlier part of the modern period, and who was the 
prominent feature of the first two generations of the indus¬ 
trial revolution, was still, as the name implies, the employer 
as well as the capitalist. He himself, that is to say, was ac¬ 
tively engaged in carrying out the function which his prop¬ 
erty made possible. But with the progress of accumulation 
there came further differentiations. It became more and 
more indisputable that the possession of capital was one 
thing and the conduct of business another; and with the rise 
of the joint-stock system capital became so split up into 
shares and stocks that it has come to be for its owners noth¬ 
ing more than a paper certificate, or an entry in the books of 
the Bank of England, which they have never seen, meaning 
to them only what it brings in by the quarter or the half- 
year. And yet these investments, this capital, is the govern¬ 
ing force in the lives of thousands and millions of men scat¬ 
tered throughout the world. It is the instrument by which 
1 Property: Its Duties and Rights, p. 22. 


ETHICS OF PROPERTY 


149 


they are set in motion, by which their labour is sustained, 
above all, by which it is directed and controlled. The di¬ 
vorce of functions is complete; and what wonder if the owner 
of capital presents himself to the imagination of the work¬ 
man merely as an abstract, distant, unknown suction-pump, 
that is drawing away such and such a percentage of the 
fruits of industry without making a motion to help in the 
work.” 

“Lastly, behind the mass of the investors, is the financier, 
who shuffles all these abstract pieces of capital about, con¬ 
trols their application, takes his commission on the proceeds, 
and constitutes himself the working centre of industry and 
commerce. The constitution of property has, in its modern 
form, reached its zenith as a means of giving to the few power 
over the lives of the many, and its nadir as a means of se¬ 
curing to the many the basis of regular industry, purposeful 
occupation, freedom, and self-support.” 

§ 5. With this growing abstractness of modern property 
its relations, psychological or other, to human personality 
have shifted. It might perhaps have been anticipated that, 
as the personal contact of owners with any concrete piece of 
property became more remote, as their property took alto¬ 
gether a more abstract character, the intensity of the senti¬ 
ment towards property, its sacredness, would be weakened. 
This, however, does not seem to be the case. There are, I 
think, two chief causes that intensify the modern sense of 
property. One is the prestige attaching to success in the 
business world. Though war is not banished from our world, 
and even threatens to resume its earlier predominance as the 
chief arbiter of fate, we are not militarists in normal times. 
Nor does the ordinary citizen concern himself much with 
politics, save at rare critical moments. The influence of re¬ 
ligion and the churches over the minds of men in most civi¬ 
lised countries has perceptibly diminished. Science, art, 
and literature are still, as ever, the passions and prizes of the 


150 


ETHICS OF PROPERTY 


few. Sport, it is true, at least for the English-speaking 
nations, furnishes a field of personal glory and prestige with 
which even business cannot compete. But, after all, for the 
great mass of active humanity the acquisition of money is 
the absorbing occupation of ordinary life. Of course, this 
predominance of the economic activities of man is not a new 
thing. But the older economic life was regulated far more 
largely by status and custom: precarious enough in detail, 
its general character and conditions were fixed for most men. 
The modern economic system affords far more freedom, 
fuller and more varied opportunities for personal success or 
failure, at a quicker pace and on a larger scale than formerly. 
Its conscious value for most possessors is the liberty and 
license of which it is the necessary instrument. More¬ 
over, for increasing numbers of men and women business has 
joined hands with ‘sport’ in its appeal to hazard and the 
gambling spirit. So the acquisition of the moneyed prop¬ 
erty through buying and selling stocks and shares is forcing 
the zest for easy, quick, spectacular wealth upon ever larger 
sections of our peoples. Thus men come more and more to 
be valued for their property. Their wealth is ‘what they are 
worth’. For an increasing number of people property, irre¬ 
spective of origin or use, has, therefore, become an object of 
‘worship’, conferring importance and honour upon its pos¬ 
sessor. 

Nor is that all. To a larger extent than ever before prop¬ 
erty is the fountain of power. Political and social castes 
have broken down almost everywhere before the impact of 
new wealth, and property is the key to personal importance. 
In the earlier stages of acquiring property, the solid advan¬ 
tages of material security and comfort compete with the 
zest of successful struggle: but established men of property 
ever tend to value their wealth more for the social considera¬ 
tion it brings and the visible satisfaction of seeing other per¬ 
sons bend to their will. The conditions of the modern world 


ETHICS OF PROPERTY 


151 


favour this economic determination of history in its private 
personal details. 

§ 6. This higher conscious regard for property is greatly 
strengthened by the challenges and attacks of revolutionary 
thinkers and organised proletarian movements. The ma¬ 
chinations of organised labour, on the one hand, of political 
democracy, on the other, have always seemed to threaten the 
fortresses of property. Trade unionism and working-class 
cooperative movements have sought to sap some of the 
profitable sources of capital, and to feed a resentment against 
aggregated wealth in the mass of unpropertied workers. 
Political democracy, especially in its revolutionary move¬ 
ments, was evidently fraught with perils to property. Its 
equalitarian temper could not be content with formal politi¬ 
cal equality: it must favour a levelling economic policy, 
interfering with large landed estates, industrial and 
commercial mohopolies and privileges, taxing the rich for the 
benefit of the poor, and crippling profitable individual enter¬ 
prise by socialistic legislation. When a class-conscious pro¬ 
letariat combined the methods of economic and political at¬ 
tack, in order to seize and exploit the full powers of political 
sovereignty for workers’ control over the economic system, 
property as understood by its possessors seemed doomed. 
Although in the most advanced capitalist countries the or¬ 
ganised workers have not in fact shown much ability or will 
to utilise the power a popular franchise seemed to give them, 
to improve their economic status at the expense of the prop*- 
ertied classes, the object lessons given by Soviet Russia and 
by revolutionary spasms in other countries after the Great 
War have everywhere contributed to give a higher conscious 
value to property as a possession and an institution. 

§ 7. For these reasons, while property in its economic 
origins and functions has been getting more and more im¬ 
personal and intangible to its owners, the sense of the rights 
and sanctity of property has been more intensely developed 


152 


ETHICS OF PROPERTY 


among the owning classes. A curiously unreasonable state 
of mind emerges. The actual conditions of most economic 
production to-day are so intricately cooperative that no per¬ 
son can lay his hand on any serviceable goods and say “ T 
made them’, therefore they are, or ought to be, my property.” 
Even where a man or a group of men seem to produce goods, 
in the shape of wheat, coal, shoes, their claim ignores the co¬ 
operative labour that has gone into the tools, machinery, and 
raw materials, necessary for their effective work. But even 
were we to impute the entire production of a ton of coal to 
the miner who has gotten it, or the quarter of wheat to the 
farmer who has raised it, this does not carry us far towards 
the Tight of property’ in it. For the coal miner and the 
farmer produce coal and wheat, not primarily for their own 
use, but for the market. The ‘property’ they are after is not 
the concrete goods they claim to produce, but their value as 
expressed in price, and as interpreted in power of purchase 
over general commodities. Now this brings into play all the 
factors on the demand side of the price equation, that is to 
say, all the cooperative processes engaged in making and 
marketing all other sorts of goods and services which in the 
last resort are to be exchanged against a ton of coal or a 
quarter of wheat, and constitute their real value, the gain got 
out of them, the ‘property’ they represent. This quite plain 
statement of what we may call ‘the social determination of 
value’, though familiar to every educated person, is com¬ 
pletely ignored by these same persons when the spot light of 
impassioned interest is focused upon an issue affecting their 
right of property. 

The simplest illustration of this is found in the attitude of 
mind of propertied persons towards the taxing-power of the 
State. Without denying that property may rightly be called 
upon to contribute its share to the necessary expenses of a 
State, property owners habitually express their resentment 
at any new tax proposal, on the ground that it seeks to take 


ETHICS OF PROPERTY 


153 


something which belongs to them because they made it. A 
sheaf of letters recently contributed to the Times , in reproba¬ 
tion of the proposal of a sur-tax upon the higher grades of 
unearned incomes, sustained this accusation. It seemed to 
the writers quite irrelevant to discuss the purposes to which 
such an increase of public revenue might be put, whether 
debt-redemption, or increased expenditure on health, educa¬ 
tion, or other social services. They had made this money, 
and the government had no right to take it from them! Now 
what had they actually done towards making this money? 
They had received it either as payments in fees, salaries, or 
profits for business or professional services which they had 
rendered, or as rents or dividends on lands or securities 
which they had obtained either by saving income obtained 
in any of the above-mentioned ways, or by inheritance. 
Now, as for inherited wealth, the claim that they made it 
could not, of course, be rightly maintained. But, since the 
persons from whom they inherited may have made it, their 
right of bequest was held to carry with it the same immunity 
from confiscation which they claimed for what they made 
themselves. The sentiment of the solidarity and continuity 
of a family, especially in relation to landed estates, helps to 
fortify this view in countries where family traditions still 
hold sway. As for the other sources of acquisition of prop¬ 
erty, the claim to have made the property runs down to the 
claim to have done something towards making it. This 
'something’ may be so substantial and so intimately related 
to the payment received as to give a very plausible support 
to the claim under discussion. Piece-wages, or other pay¬ 
ments commensurate with the amount of work done by a 
particular individual, will naturally appear to the recipient 
as earnings he has 'made’, though a rise in piece-rates, which 
give him more money for the same work, will not seem in any 
way to conflict with this appearance. On a higher level, we 
find the inventor of a new instrument or process, the dis- 


154 


ETHICS OF PROPERTY 


coverer of a new market, the successful administrator of a 
competing business, even the maker of a trust or combine 
complacently assuming that the gains that come to him 
from his activity constitute a property which he has made 
by his personal effort. So also of the writer of a successful 
novel, or the painter of a picture, whatever payment he re¬ 
ceives is a property that belongs to him because he has made 
it. When a business man, a professional man, or an official, 
invests money out of his earnings, the interest of his invest¬ 
ment is also felt and believed to be money he has made by 
his exertions and sacrifices. 

§ 8. The full study of this mentality belongs to our later 
analysis of the sources of income, and of the processes of 
bargaining by which the several sorts of income are deter¬ 
mined. For the present, it must suffice to call attention to 
the naivete of the assumption that the economic system on 
its distributive side is and must be satisfactory from the 
ethical standpoint. For the ‘moral’ defences of inequality 
of distribution of property rest ultimately upon this assump¬ 
tion. These defences are two. 

(1) Industry, intelligence, foresight and thrift, character 
— these personal factors are the true sources of success, and 
property is their encouragement and reward. Remove the 
prospect of great personal gain and you sap the sources of 
economic progress, so injuring not only personality, but com¬ 
munity. In effect, the tacit assumption underlying this 
whole attitude of mind is that, if my personal activity, or the 
activity of any economic resources under my control, con¬ 
tributes towards the production of any economic goods, the 
payment actually accruing to me from this contribution is 
something I have made. If, then, any outside power, the 
government, or some conspiracy of labour, attempts to take 
any part of this money, by pressure of taxation or extor¬ 
tionate wage-rates, such action amounts to a confiscation of 
my property, i.e., that which properly belongs to me. Below 


ETHICS OF PROPERTY 


155 


this assumption, however, lurks another, to the effect that 
the process which I have called the social determination of 
price is an equitable process, in that it assigns out of the 
general body of wealth to each what ‘belongs’ to him, what 
his contribution to its making is 'really worth’. Not only 
is the social determination of price an equitable law. It is, 
in the strict sense, a natural law. For if you were to dis¬ 
tribute property equably to-day, in a very short time diver¬ 
gencies of character, aims, and uses, would restore the old 
inequality. Poverty is the natural result of personal ineffi¬ 
ciency, wealth of personal efficiency. There are exceptions, 
but the rule holds good. 

(2) The other defence virtually ignores origins in its ap¬ 
peal to uses. Property is a 'stewardship’, a 'trust’, valid if 
it is well administered for personal and social purposes. 
This is a doctrine of ancient respectability. We find it 
evolving in the early history of the Christian church as an 
escape from the communistic doctrine. Here is a passage 
from St. Clement of Alexandria. "Our Lord does not, as 
some suppose, command the rich man to throw away his pos¬ 
sessions, but to cast from his heart the love of gold, with all 
those cares and preoccupations that stifle the germs of 
life . . . What new thing does the Son of God teach us 
in this? Not an exterior act such as many have performed, 
but something higher, more perfect, and more divine, the out- 
rooting of passions from the soul itself, and the renunciation 
of all that is alien to its nature . . . Worldly goods should 
be considered as materials and means to be used for pious 
purposes, to be turned to good account by those who know 
how to use them skilfully.” 1 

Here is the rationale of Ruskin’s new chivalry, of landlords 
who shall administer their estates, not for the extraction of a 
rent-roll, but for the useful employment of a well-remuner¬ 
ated and contented peasantry, and for the production of the 
1 Quoted in Nitti’s Christian Socialism, p. 70. 


156 


ETHICS OF PROPERTY 


nation’s food, and ‘captains of industry’ who shall run their 
works with the same active interest in the welfare of their 
employees and the community. Such properties are justi¬ 
fied by their uses. This doctrine was sedulously taught by 
one of the ablest English philosophers of our generation, Dr. 
Bosanquet, who tells us that “if one has more than enough to 
live on, that is a charge — something to work with, to or¬ 
ganise, to direct.” 1 How one comes to possess “more than 
enough” is a question deemed irrelevant to the moral issue. 
Why scrutinize origins if good use is made of wealth? 

This doctrine of property as a public trust has received a 
good deal of support from economists, who, while admitting 
and deploring the extravagance and waste of certain classes 
of the ‘idle rich’, point out that an increasing share of great 
modern fortunes is utilised for definitely social purposes. 

For (1) either it is put back into industry as reserves or 
new capital, so maturing in a continual increase of productiv¬ 
ity for the general gain; or (2) it goes into educational, sci¬ 
entific, and charitable purposes for the improvement of life. 

Mr. J. M. Keynes, writing of the development of the Eng¬ 
lish industrial system in the nineteenth century, urges that 
“it was precisely the inequality of the distribution of wealth 
which made possible those vast accumulations of fixed wealth 
and of capital improvements which distinguished that age 
from all others.” “Like bees they saved and accumulated, 
not less to the advantages of the whole community because 
they themselves held narrower ends in view.” 2 The touch 
of Smith’s “invisible hand” apparently still adheres to mod¬ 
ern economic theory! But it works in a mysterious way, 
for it defies not only equality but equity. “The immense 
accumulations of fixed capital which, to the great benefit of 
mankind, were built up during the half century before the 
war, could never have come about in a society where wealth 

1 Civilisation of Christendom, p. 332. 

2 The Economic Consequences of the War, p. 19. 


ETHICS OF PROPERTY 


157 


was divided equitably.” 1 Whether it is, or can be, true that 
industrial welfare depends upon an inequitable distribution 
of wealth, is a thesis to which we will return in our closer dis¬ 
cussion of the place of capital in the economic system. We 
cite it here as the frankest expression of the claim of wealth 
to be the unintended servant of humanity. 

§ 9. In close association with the ‘stewardship’ defence of 
riches is another. It has always been contended that a 
wealthy leisured class, withdrawn from the pressure of eco¬ 
nomic necessity, was an indispensable condition of the 
growth of learning, literature, and all the finer arts of civili¬ 
sation. The patrons, and sometimes the practitioners, of 
culture were men of wealth and leisure. In the ancient civili¬ 
sations of Babylonia, Assyria, Egypt, India, princes and 
nobles called into being the great arts of architecture, sculp¬ 
ture, and painting. The flowering of Greek and Roman art 
and literature, science, and philosophy was the cultivated 
product of an oligarchic caste living on servile labour. The 
art and poetry of the Italian renaissance, of Elizabethan 
England, the dawn of modern science and learning in the 
monasteries and universities of Europe, were only possible 
upon the basis of patronage and endowment by which leisure 
was won for works of disinterested curiosity and experimen¬ 
tal skill. So it has been up to our own time. The support 
and stimulus given in Eighteenth Century Europe by courts, 
titled patrons, and aristocratic coteries, in Paris, London, 
Weimar, have been in some measure displaced by broader 
educated publics, less wealthy and less leisured. This demo- 
cratisation of culture is a new page in human history, and to 
some it spells debasement of its finer qualities. The broad¬ 
casting of learning, literature, and art, by schools and col¬ 
leges, museums and galleries, books, lectures, magazines, and 
newspapers, is a disturbance of the old order. But it is not 
cultural democracy; it is not the genuine intellectual self- 
i Idem. 


158 


ETHICS OF PROPERTY 


expression and self-government of the peoples. For in its 
making and growth, though the patronage of an intellectual 
elite is no longer dominant, the influence of wealth is not 
diminished. A new patronage and a new direction of the 
cultural arts have come with the rapidly made fortunes in 
finance and industry. In the older aristocracies of birth or 
commerce certain traditional standards of taste and value 
prevailed, unduly conservative perhaps, but preserving con¬ 
tinuity of the cultural arts. The new plutocracies exercise 
their control with no such safeguard. Whether they follow 
their own usually untutored tastes as patrons and collectors 
for private enjoyment and prestige, or as Trustees’ and ‘stew¬ 
ards’ for the public, what guarantee is there that their ex¬ 
penditure is not abused? The application of the term ‘trust’ 
to the property a rich man chooses to apply to public pur¬ 
poses is a misnomer, if it is held to signify some moral pur¬ 
pose. For the moral test of a trust or stewardship is the 
capacity to make good use of the commitment. Now why 
should it seem reasonable that a man, who has by modem 
business methods amassed a large fortune, is qualified to ad¬ 
minister that fortune for the public good, by endowing uni¬ 
versities, missions, churches, museums, libraries, hospitals, 
or scientific research? There exists no natural harmony be¬ 
tween these processes of acquiring and spending wealth. It 
may, indeed, be held likely that a man, well qualified by 
ability and character for great success in the rude struggles 
of the business world, is exceptionally ill-qualified to spend 
his money for the good of others. But be that as it may, the 
art of spending great wealth for the public good is so diffi¬ 
cult and delicate that to entrust it to those who have no other 
claim to possess this art than that they have been able to ex¬ 
tract this surplus wealth from the modern business system 
is a manifestly foolish proceeding. The primitive man who 
has made a spade or a hut may quite reasonably be expected 
to make the best use of it by using it himself. But a modern 


ETHICS OF PROPERTY 


159 


business man who has made a pile has by so doing probably 
disqualified himself for using it to the best advantage, even 
for his own benefit, much more for the benefit of others. 
While, therefore, we may commend the millionaire donor for 
his generous spirit and benevolent intentions, we cannot re¬ 
gard him as a safe administrator of a public trust. If it be 
replied that experience belies this criticism, in that great ac¬ 
knowledged advances in education, hygiene, morals, and 
many of the arts and sciences, are due to the munificence of 
millionaires, and could not have been financed in any other 
way, two rejoinders are possible. 

In the first place, it may be urged that oligarchic patronage 
of culture has imposed standards of value which have no ob¬ 
jective validity, that, in other words, they promote artificial 
culture, expressing not the healthy harmonious tastes, activi¬ 
ties, and interests of ordinary men and women, but the deco¬ 
rative refinements of a parasitic leisure class, evolved for the 
expression of personal power and prestige. Those of us who 
have been exposed from childhood to the subtle influences of 
these prevailing intellectual and aesthetic standards must in 
the nature of the case be disqualified for a disinterested 
valuation of them, while for the excluded populace the very 
sense of this exclusiveness will naturally tend to resentment 
and disparagement. Take, for example, the controversy 
waged around the cultural virtues of Hellenic literature and 
art. Who shall assess the part contributed to the apprecia¬ 
tion of these virtues by the inherent beauties and refinements 
of these cultural achievements, and the part contributed by 
the sense of personal elevation by reason of the rarity of such 
appreciation? The self-appraisement of high scholarship, 
attesting marvels of refined and elevated achievements which 
only a few accomplished minds can adequately apprehend, 
cannot be regarded as a sufficient reason for incorporating 
the language and literature of Greece as a mainstay of cul¬ 
ture for the youth of to-day, the great majority of whom by 


160 


ETHICS OF PROPERTY 


common admission would not attain to a level of scholar¬ 
ship sufficient to enable them to garner the finer fruits of 
Hellenism. 

But if there is danger in entrusting cultural valuation to 
an intellectual class withdrawn from the common lot and 
prone to overrate their rare possessions, a still graver danger 
arises from the disparagement of the finer and more delicate 
fruits of culture by the crude patronage of the nouveaux 
riches. For if the quick millionaire is true to his real stand¬ 
ards, not only history but poetry and all the wealth of genius 
in literature and the fine arts will be simply ‘bunk\ If, on 
the other hand, he sets his untrained business mind to the 
appraisal and encouragement of the higher learning, he is 
liable to do still graver injury to the more sensitive forms of 
this learning. 

But, it may be argued, at any rate the services rendered 
by the donations of the rich to the encouragement of the 
sciences and to practical philanthropy are not seriously ex¬ 
posed to such damages. The endowment of scientific re¬ 
search into tropical diseases, expeditions of geographical or 
ethnological discovery, the provision of parks, hospitals, mu¬ 
seums, and other wholesome and useful apparatus, even if 
motived, in part, by personal pride and love of praise, are 
solid human gain. Now this may fairly be admitted with 
one considerable qualification. Whenever the living hand of 
private benefaction is laid upon the sciences most closely re¬ 
lated to the current conduct of human life, biology, psychol¬ 
ogy, philosophy, history, economics, politics, sociology, there 
will be some conscious or unconscious moulding of these 
studies in accordance with the interests and intellectual pro¬ 
clivities of present or prospective donors. The very rich¬ 
ness of the humanity in such studies renders their facts and 
interpretations more liable to selection, rejection, and inter¬ 
pretation in the light of preconceived ideas, and these ideas 
will be likely to harmonise with the interested mentality of 


ETHICS OF PROPERTY 


161 


the munificent. The blunt vulgarity of the saying that, ‘He 
who pays the piper calls the tune’, has subtler applications. 
In tracing the evolution of Political Economy, we have al¬ 
ready exposed the essential truth of the economic interpreta¬ 
tion of economic science. As the social sciences take on ever 
more distinctively a psychological aspect, psychology itself, 
pure and applied, individual and social, will be the science 
most exposed to the half-conscious manipulation of those 
propertied interests which scent danger in some lines of ad¬ 
vance, security and gain in others. Even the munificence 
which takes shape in works of true humanity, the relief of 
human want, ignorance, and pain, has a protective value for 
riches, serving to abate resentment at the inequality of dis¬ 
tribution of this world’s goods. The knowledge of this tends 
in some measure to a wastage even of the wealth available 
from private sources for such relief works, throwing an un¬ 
due proportion of it into the more showy lines of philan¬ 
thropy, too little into the study and furtherance of the less 
direct but more radical measures of relief. 

§ 10. But there remains an even more serious criticism of 
the ‘stewardship’ defence of riches. We have already noted 
that defenders of the present inequality insist that much 
good work done by voluntary munificence would otherwise 
remain undone. The public in its collective capacity is too 
poor, or too indifferent, to undertake it. And this is true. 
But, to what are this poverty and indifference of the public 
due? An economic system which so operates as to assign 
the great body of accumulated wealth to a few individuals, 
as their private property, and gives no recognition to the 
existence and activities of the community, society as an or¬ 
ganic whole, in the production of wealth, deprives the latter 
of the means to organise effectively the services which prop¬ 
erly belong to it. The necessity of calling upon individual 
owners to surrender to the State out of their private property 
the revenue required for public services inevitably tends to 


162 


ETHICS OF PROPERTY 


restrict those services, and to prevent a development of pub¬ 
lic activities commensurate with the more enlightened inter¬ 
pretation of public welfare. In earlier civilisations, where 
there was little opportunity to utilise the surplus productive 
power of the people for capitalistic enterprises, the utilities, 
adornments, and amenities of civic life were the natural 
channel into which the surplus flowed: the right and power of 
the community to direct what surplus energy was available 
into these common services were supported by a very real 
sentiment of the people. The individualistic trend of mod¬ 
ern times has largely stifled this active sense of community. 
Community now lives on suffranee, by taxes paid grudgingly 
out of private purses. Its important services to the produc¬ 
tion of the body of wealth absorbed in private incomes, and 
the rightful income of the community in virtue of these serv¬ 
ices, fail to win recognition in the play of an economic sys¬ 
tem which distributes the whole of its product to the indi¬ 
vidual owners of land, capital, and labour. If the question 
were posed plainly, “Do not the public services of the na¬ 
tional and municipal governments, for the defence and 
security of the citizens, for their health, morals, and educa¬ 
tion, for their personal happiness, efficiency, and progress, 
perform work that is directly conducive to the efficient opera¬ 
tion of the economic system?” an affirmative answer could 
not be refused. Yet when economists specify the factors of 
production, and envisage the distribution of income among 
them, these community activities are almost always ignored. 
Wealth is treated as if it were entirely the product of private 
personal efforts. The community is only dragged in at a 
later stage: its claims are based upon necessity, or upon 
eleemosynary considerations, and not upon the right to draw 
for community life the income which community services 
have earned. 

This formal disparagement of community, in the interests 
of an all-absorbing private personality, is the most distinc- 


ETHICS OF PROPERTY 


163 


tive note of modern life. Thus starved and disparaged, 
community becomes indifferent, refuses to exert its will and 
responsibility for a life of progressive activities in state and 
city, and with servile gratitude allows munificent philan¬ 
thropists to perform its proper functions. The issue is a 
grave one. The origins of wealth cannot be ignored in con¬ 
sidering its uses. As the individual needs some command of 
the property he has personally helped to make, in order to 
realise his own personality, so the community needs com¬ 
mand of the property it has helped to make, in order properly 
to realise the common life. Not even the most benevolent 
and intelligent of private owners can be considered compe¬ 
tent to mould the cultural life of the community, to set its 
standards of aesthetic tastes, and to control its teaching of 
the social sciences. The apophthegm of St. Thomas Aquinas 
still retains its validity. “The possession of riches is not un¬ 
lawful, if the order of reason be observed, that is to say, that 
a man possesses justly what he owns, and that he uses it in a 
proper manner for himself and others.” But St. Thomas’s 
judgment evokes social reflections. Having regard to what 
we have called the social determination of values, can it be 
said that riches are acquired justly? Again, can a man to 
whom riches have come unjustly, i. e., by economic force or 
^cunning, luck or inheritance, be able to “use in a proper man¬ 
ner” either for himself or for others this wealth? Can he be 
relied upon to use it so as to raise the personality of others 
and to enrich the common life? 

It is foolish to ignore the significance of such questioning. 
Unless property, in origin and utilisation, is set upon a basis 
of recognised equity, riches may be as injurious as poverty 
to human personality and to community. Maldistribution 
of property cannot be rectified by voluntary concessions of 
recipients, even if the rich were inspired by a wholly disin¬ 
terested desire to ‘do good to others’. But the man of prop¬ 
erty, whether inherited or acquired, will be a genuine be- 


164 


ETHICS OF PROPERTY 


liever in the economic system which gave him his property. 
He will think that he has got it ‘justly’. His acquisitive in¬ 
stinct will be fed by success. He will enjoy his power and 
personal prestige. He will resent scrutiny into the methods 
of acquiring property. The education he endows will tend 
towards quietism in social teaching, orthodoxy in religion, 
conservatism in politics: will favour the physical sciences 
and a pragmatic utilitarianism, qualified by a decorative 
culture superimposed upon character, so as not to stir unduly 
the depths of the human spirit. 

§ 11. This disquisition on the dangers of property un¬ 
equally apportioned and divorced from responsibility must 
not be understood as a disparagement of the human value of 
property as a social institution. Property is indispensable 
as a support of personality and community, and the proper 
balance or harmony between these functions is of paramount 
importance in a sound society. Certain modern characteris¬ 
tics of property, its unequal distribution, its defects of origin 
and use, and above all the severance between ownership and 
effective control, are found to impair both functions. But 
these excesses and defects must not be considered as disclos¬ 
ing faults inherent in the institution of property per se. 
Rightly administered private property is a social force mak¬ 
ing for genuine community of life and interests. Dr. Edwin 
Cannan thus expresses its cooperative service. 

“At first sight, perhaps, property appears as rather a 
separating than a uniting force: it seems to set up separate 
interest and thus to divide the people. But as a matter of 
fact it unites them by compelling and facilitating their co¬ 
operation. It compels it at any rate where there are any per¬ 
sons without enormous stretches of landed property, because 
small patches of land do not contain all the requisites of 
existence, and so, if a person has only a small patch he must 
obtain some things from other people. If he has no land at 
all, it is still more obviously necessary that he should make 


ETHICS OF PROPERTY 


165 


terms with others in order to satisfy his needs. Property 
facilitates cooperation by making it depend upon innumer¬ 
able separate agreements between individuals and groups of 
individuals, instead of on decisions arrived at by society at 
large, acting through some sort of world-wide authority.” 1 

In fact property is both a separating and a uniting force, 
according as the personality it feeds is and feels itself to be 
a private being or a member of a community. For the moral 
function of property is the humanising of these claims. But 
cooperation of individuals in their several interests is not 
community. The distinctive note of the modern economic 
system up to quite recent times has been a purely individual¬ 
ist conception of property and its function. This concep¬ 
tion, however, is now being sensibly modified, partly by a 
clearer recognition of the part actually played by commu¬ 
nity in the creation of property; partly by a greater willing¬ 
ness to make use of organised social institutions and activi¬ 
ties for the common good. 

A stronger apprehension of the social nature of wealth- 
creation is coming to demand a reversal of the roles assigned 
respectively to individual and community. Not how little 
shall the individual surrender to the community, but how 
much shall the community leave to the individual for the rea¬ 
sonable furtherance of his private personal needs, is the new 
ethical attitude towards property. It is an aspect of a still 
wider movement of thought and feeling, in favour of the 
whole as against the particular, and is illustrated in politics 
by a strengthening of the federal bond, not as implying hos¬ 
tility to local autonomies, but as a means of increasing the 
efficiency of those autonomies. More communal control 
over property is desiderated, in order that social personality 
may be better realised. This change of mental attitude is, 
however, slow, and the needed adjustments in political and 
legal institutions, involved in its effective expression, are 
i Wealth, p. 84. 


166 


ETHICS OF PROPERTY 


lacking. The tacit assumption that everyone has a moral 
right to anything he can legally lay his hands on, for his 
separate and sole enjoyment and use, coupled with the fact 
that legality ever lingers far behind the needs and equatics 
of each current situation, is a source of grave unrest. With 
spreading education and a wider understanding of the eco¬ 
nomic system, the discontent of a ‘proletariat’ destitute of 
property, and therefore crippled in personality, becomes a 
more potent force for the readjustment of the institution of 
property. Partly, it makes for a distribution of income ade¬ 
quate to personal saving and investment among larger sec¬ 
tions of the people. Property thus becomes diffused in 
ownership, though its inequality may not be much abated. 
Partly, it makes for communism in a limited but growing 
measure, that is to say, the public undertaking of education, 
insurance, pensions, hygiene, recreation, and other free serv¬ 
ices for the peoples. The other important readjustment of 
property is the piece-meal ‘socialism’, which, repudiated in 
theory by the political masters in most modern states, is 
everywhere advancing in practice. 1 The public ownership 
and operation of certain types of industry is everywhere en¬ 
larging the property of the organised community, appreci¬ 
ably modifying the earlier absolutism of private property 
and private enterprise. 

1 The Report of the Liberal Industrial Enquiry in Britain, published 
in 1928, is a remarkable testimony to this change of attitude towards 
individual rights of property. 


CHAPTER II 


HARMONY AND DISCORD IN 
ECONOMIC LIFE 

§ 1. Economic institutions are ethically sound so far as 
they are effective instruments for the realisation of personal¬ 
ity and community. The relation of personality to com¬ 
munity is, however, as we have recognised, a controversial 
issue. Most ethical thinkers and social philosophers incline 
to regard community as a body of social institutions or ac¬ 
tivities whose end, meaning, and value, consist in the contri¬ 
bution they make to personality. There is, according to this 
view, no group or social mind or consciousness. In dealing 
with this position we have laid stress upon those classes of so¬ 
cial activities and phenomena where cooperation and inter¬ 
action of private interests and purposes so modify and al¬ 
ter their nature and working as to give to that cooperation 
and interaction a special psychical character akin to per¬ 
sonality. Thus regarded, community is not merely a set of 
social institutions and activities, but in effect a collective per¬ 
sonality, a partial fusing of the individual minds and pur¬ 
poses in what may be termed a federal unity. If individuals 
utilise community in order to realise their material and spir¬ 
itual aims, so does community use individuals to realise the 
common life. My reason for reverting to this controversial 
topic is that it is very difficult to frame any consistent ethical 
evaluation of the economic system which does not give some 
distinctive position and value to the physical and spiritual 
aspects of community. I would go so far as to maintain that 
in any moral reconstruction of economic life a central issue 

167 


168 ECONOMIC HARMONY AND DISCORD 


is that of providing for the harmonious relations of indi¬ 
viduality and community as coordinate values. 

In support of this position I would appeal in the first in¬ 
stance to the two attempts at a presentation of the economic 
system as an operative unity which have come up in the last 
two chapters, viz., the doctrine of ‘the invisible hand' and the 
theory of ‘social determination of value’. Although the 
earlier of these doctrines was intended and used to justify 
liberty of individual enterprise as a sufficient principle of 
economic life, the presentation of the natural harmony in¬ 
volved in its support is in effect a naive doctrine of com¬ 
munity. Regarded as an application, within the economic 
sphere, of a providential design which to Adam Smith, as 
moral philosopher, was applicable to all human life, it con¬ 
tains a plain assumption of a general directive purpose play¬ 
ing through the economic system as an organic whole, and 
thus securing cooperation and harmony of particular indi¬ 
vidual interests and purposes. Similarly, the social deter¬ 
mination of values, to which we made reference in our 
discussion of property, presents the same doctrine in a some¬ 
what different shape. It indicates how the current economic 
system, working as an organic whole, under the regulation 
of various legal, customary, and other social conditions, de¬ 
termines and assigns at each several point in that system the 
share of the general product which falls to each cooperant 
member. Here also, as in the Smithian harmony, it is the 
economic system, as an operative community, that is held to 
allot to each individual his share, “what he is worth”, as a 
member of the economic community. 

§ 2. If, then, we are to bring ethical criteria into the field 
of economics, we are bound to direct them in the first in¬ 
stance, not to the detailed activities and claims of individ¬ 
uals, but to the structure and functioning of the organic sys¬ 
tem as a whole. Our presentation of this system, as a social 
determination of particular values, merely states the facts 


ECONOMIC HARMONY AND DISCORD 169 


and not the equities of such determination. There can be no 
presumption from this social determination that the real 
needs and interests, either of personality or of community, 
are rightly and effectively satisfied, that each participator 
actually gets “what he is worth”. There is, however, a pre¬ 
sumption, nay, an assurance, that each participator gets out 
of the social distribution what is sufficient to enable and 
induce him to contribute what he does contribute to the pro¬ 
duction of the wealth that is distributed. The economic sys¬ 
tem evidently works, but does it work equitably and effi¬ 
ciently? The two conditions are not always closely related. 
A slave system, violating the elementary rights of man, may, 
under intelligent management, work efficiently. An ex¬ 
clusive class of landowners may live in comfort upon rents 
extracted from peasant cultivators of the soil, provided that 
they leave enough of the produce to induce the peasants to 
do their best by the land. Industrialists may get their mines 
and factories worked efficiently, provided they pay wages of 
efficiency, that is to say, wages sufficient to replace the cur¬ 
rent wear and tear of labour plus such additions as custom or 
the bargaining power of the workers can secure. Here two 
distinct determinants emerge. The continuous replacement 
of physical wear and tear is a physical law of wages: it re¬ 
gards the worker as a machine to be fed with fuel, provision 
for replacement being made in respect of his physical struc¬ 
ture. An intelligent slave-owner pursues this policy: an 
employer of ‘free labour’ need not, however, make provision 
even for replacing ‘wear and tear’, provided he can throw 
this cost upon ‘the community’. But the economic system 
demands as its first principle of efficiency that either indi¬ 
vidual employers, or society, shall maintain in physical ef¬ 
ficiency the quantity of labour-power needed to support the 
fabric of that system and to provide for such increase as may 
be required. Excepting in so far as some addition to this 
pay, in respect of customary dues or an established standard 


170 ECONOMIC HARMONY AND DISCORD 

of comfort, is supported by some feeling of ‘right’, it cannot 
be held that any close linkage exists between the efficiency 
and the equity of such a system. An exceedingly inequit¬ 
able distribution of income may be consistent with efficiency, 
where custom or mental inertia maintains a moral acqui¬ 
escence in the existing modes of distribution. But when the 
workers become aware of the inequities of their economic 
situation, this consciousness reacts upon efficiency by caus¬ 
ing an unrest and discontent with the current ‘social deter¬ 
mination of values’. When an actual sense of the inequity 
of distribution obtains lodgment in the minds of large sec¬ 
tions of the workers, it interferes with the earlier automatic 
efficiency. When the workers perceive, or think that they 
perceive, a large share of the product of ‘their labour taken 
from them by landowners, capitalists, and profiteers, whose 
productive services they do not recognise, a new proletarian 
mentality becomes an economic factor tending to reduce the 
efficiency of the economic system. This class-conscious an¬ 
tagonism between labour and capital, or more directly be¬ 
tween labour and the profit-seeking entrepreneur, thus en¬ 
gendered, is by general admission a peril to economic order 
and progress. The question whether, or how far, the new 
claims of labour to more wealth and more leisure as equitable 
rights are justified can only be answered adequately by a 
close analysis of the processes of bargaining and price-fixing, 
to which we shall turn presently. For the moment we are 
concerned to note this new moral fact of widespread and in¬ 
tense discontent on the part of large sections of workers with 
the economic lot which the operative economic system as¬ 
signs to them. This new moral fact is everywhere inter¬ 
fering with the efficiency and productivity of industry, im¬ 
pairing the harmonious cooperation of the human units in 
the economic system. It has become evident that, if effi¬ 
ciency is to be restored to the system, some conscious policy of 
‘industrial peace’ must be applied, in order that the efficient 


ECONOMIC HARMONY AND DISCORD 171 


cooperation of the factors of production may be secured by 
such readjustments in structural relations as are recognised 
to be feasible and equitable. This exploration of industrial 
peace has emanated more from groups of enlightened indus¬ 
trialists than from class-conscious labour. There are, how¬ 
ever, many signs in industrial Europe and America of an in¬ 
creasing willingness of workers and industrials to experiment 
in methods of attaining industrial peace, with a clear recog¬ 
nition that the existing economic system does not adequately 
fulfil the equitable and harmonious functions with which the 
classical economists endowed it. 

§ 3. A brief consideration of these methods of reconciling 
divergent interests will be extremely serviceable to our wider 
purpose of an ethical valuation of the economic system. Its 
prime service will be the testimony it affords of the failure of 
the practical reformer everywhere to recognise the inade¬ 
quacy of the separatist treatment of organic diseases. The 
shape taken by this separatist fallacy in attempting to solve 
our present problem runs as follows. The conflict of inter¬ 
ests, real or apparent, between capital and labour can best 
be pacified by separate action first within each business, 
then, so far as capital and labour are organised by trades, 
within each trade. Thus the edifice of industrial peace will 
be built upon solid foundations of detailed human relations. 
Do not impose theories or principles from on high, but work 
from below upwards along lines of tested experience in con¬ 
crete cases. Now if we follow out the implications of this 
patchwork method of achieving peace and justice, we shall 
recognise alike its limited utility and its ultimate futility. 
The traditional psychology of the business man in the west¬ 
ern world prohibits alike any adoption of principles of or¬ 
ganic reconstruction that have not emerged as legitimate 
inductions from trial and error in particular cases. Nor is it 
only to the business man to whom wholesale schemes of re¬ 
construction make no appeal. The ordinary workman, how- 


172 ECONOMIC HARMONY AND DISCORD 

ever dissatisfied with his economic lot, has little use for large 
revolutionary ideas and policies. Though those who,, by 
reason of his refusal to think, have forced themselves into 
leadership, may formally commit him to large revolutionary 
policies, they cannot commit him to sustained activity along 
such lines, and their half-awareness of this impotence im¬ 
parts an air of unreality to their revolutionary professions. 
This is well illustrated in the keen appreciation which Soviet 
revolutionists in Russia have manifested of what seems to 
them the hypocrisy of British labour leaders. Hypocrisy, 
or conscious insincerity, it is not. The trade unions drlabour 
congresses and conventions, where high-sounding socialistic 
formulas are adopted by slackly chosen delegates of local 
groups, are well aware that these formulas and the policies 
which they comprise have very little purchase on the minds 
of the rank and file of labour, exclusively concerned with de¬ 
fending or bettering the conditions of employment in their 
local trades or, still more insistently, in the particular busi¬ 
nesses in which they are employed. Though in rare emer¬ 
gencies they can be led into the active endorsement of some 
large concerted policy, such as the strike of 1926, their normal 
mind reverts to short-range local, specialised, and concrete 
opportunism. In such an atmosphere there has grown up in 
the different trades and businesses a large complex and varied 
machinery for adjusting the relations between employers 
and employees, joint committees, boards of conciliation, de¬ 
vices of sliding scales, Trade Boards, Whitley Councils, 
and other modes of settling differences and promoting joint 
interests. This machinery assumes both a harmony and a 
diversity of interests in employer and employed, and its aim 
is to increase the harmony and to diminish the diversity. 
But the point of importance here is that this machinery has 
grown up almost entirely in response to the needs and cir¬ 
cumstances of employment in the several local firms and 
trades, expanding into provincial or national instruments 


ECONOMIC HARMONY AND DISCORD 173 


where capital and labour in the several trades are strongly 
organised upon these larger scales. There is, indeed, a grow¬ 
ing element of wider social control exercised by the State, by 
regulations touching the health and safety of workers, un¬ 
employed relief, and other matters where inability of em¬ 
ployees to make adequate protection of their interests is 
presumed. In recent years an even more significant State 
action has evolved in Great Britain in the shape of Trade and 
Wage Boards for the regulation of wages in a number of less 
organised trades, though in their constitutions the authority 
of the State is used very sparingly to override the separate 
self-government of the trade through its chosen representa¬ 
tives. The imposition of a common wage-rate in a trade by 
the will of a majority of the representatives of employers and 
employed does, however, constitute a surrender of the com¬ 
plete autonomy of the single business, which in the business 
world at large still stands as the first principle of economic 
government. In Britain a further advance has been made 
in the establishment of a National Wage Board for the de¬ 
termination of wages and other conditions of employment in 
the railroad industry, while the Industrial Court, set up in 
1919 to determine trade disputes between employers and em¬ 
ployed, though void of compulsory powers of settlement, in¬ 
dicates a further recognition of the right and obligation of 
organised society to intervene in what were hitherto con¬ 
sidered purely private quarrels. If we turn to the experience 
of Australia, New Zealand, and Canada, and still more re¬ 
cently to Germany and Italy, we find the emergence of two 
definitely social processes of control, first the imposition of 
compulsory arbitration, and secondly, the formulation of a 
fair wage by the criterion of the needs of the worker and his 
family. Thus at different paces in various countries a sort 
of national suzerainty is set up over the autonomous trades 
and businesses, with the objects of imposing industrial peace 
and of securing equitable conditions for the workers. 


174 ECONOMIC HARMONY AND DISCORD 


§ 4. Experience in this social-economic policy has by com¬ 
mon admission not been an unqualified success. And the 
reasons are not far to seek. A central tribunal is not in 
possession of any principle or criterion enabling it to deter¬ 
mine a fair wage or other equitable conditions in the wage- 
bargain, nor has it any power to compel employers or em¬ 
ployed to accept conditions which may be unsatisfactory or 
even financially impracticable. The failure of Australian 
judges to provide any reliable definition of a ‘living’, a ‘fair’, 
or a ‘reasonable’ wage is not surprising. For the stubborn 
fact of the complete financial autonomy of every business, 
the fact that the prices it can get for the goods it sells are the 
only source out of which it can pay wages and interest on its 
capital, stands in permanent conflict with the claim of an out¬ 
side body to fix a fair or reasonable rate of pay. It is, no 
doubt, true that such a Court may take the view that no rate 
is reasonable, or fair, which is beyond what the business or 
trade in question can pay. But such an interpretation is in 
effect an evasion of the obligation imposed upon it, to secure 
a ‘living’, or ‘fair’, or even a ‘subsistence’ wage. For it im¬ 
plies that prices and profits must govern the interpretation of 
these terms, and that the standard of living of employees 
may vary indefinitely with conditions of trade. This is, of 
course, a complete surrender of the duty with which such a 
tribunal is entrusted. If, on the other hand, it insists on a 
wage-award, which is either so high that it cannot be met out 
of the income of the business, or so low that the employees 
will not consent to work for it, the Court is virtually power¬ 
less to enforce its award. With due acknowledgment of the 
valid argument that the obligation to pay a higher price for 
labour may and often does induce employers to discover 
other methods of reducing ‘costs’, it cannot be contended 
that the ‘reasonable’ award of a tribunal can necessarily be 
met by such adjustments. So long as the basic principle of 
industry is that every business is dependent for its finance 


ECONOMIC HARMONY AND DISCORD 175 


upon the quantity of goods it can sell and the price it can get 
for them, and that this income is the only source out of which 
wages, interest, and other costs can be met, the attempt of any 
outside body to regulate wages by some general principle of 
equity or humanity cannot be successful. It is a well- 
grounded suspicion of this dilemma that has in countries like 
England and the United States preserved substantially in¬ 
tact the autonomy of the separate business in most depart¬ 
ments of industry and commerce. The organisation of capi¬ 
tal and labour within the several trades has, indeed, tended 
to the establishment of common codes of bargaining and 
common standards of labour conditions, but the ultimate 
contract is between the worker and the employer in the sep¬ 
arate business, and out of the proceeds of that business all 
labour and other costs must be met. On certain recent modi¬ 
fications of this situation, brought about by cartelisation and 
other combinations involving some measure of joint finance, 
we shall touch later. At present our argument centres round 
the disclosure of the difficulties attending the attempt of or¬ 
ganised society to secure conditions of industrial peace. 
Here we find a fundamental contradiction between the social 
determination of the value, or real income of a business, and 
the obligation of that business to pay a ‘fair’ wage to its 
workers, or we may add, a ‘fair’ dividend on its capital. It 
is this contradiction which makes it impracticable to seek a 
satisfactory solution of an industrial conflict within the sep¬ 
arate area of the particular business or trade. For, as this 
social determination of value means that the particular busi¬ 
ness cannot in reality control the income at its disposal, it, 
therefore, cannot safely undertake fixed payments out of this 
income. And what is true of the single business is also mani¬ 
festly true of the single trade. Its financial prosperity or 
adversity though due in part to the skill, energy, and enter¬ 
prise of its constituent members, is mainly due to the general 
productivity of the economic system as a whole, which de- 


176 ECONOMIC HARMONY AND DISCORD 


termines how much or how little of all other sorts of wealth 
are obtainable for a given product of the trade in question. 

§ 5. Under such conditions it is inconceivable that any 
serious dispute within the area of a single business or trade 
can be satisfactorily settled on the hypothesis that only the 
capital and labour of that business or trade are involved. 
The whole course of experience in private or public arbitra¬ 
tion bears out this judgment. Take any concrete case where 
the workers in a business or trade claim a rise of wage-rates, 
in order that they may attain a fair or reasonable standard 
of living. How is it possible that this claim can be adjusted 
by a tribunal which is unable to look outside the facts and 
figures of the business or trade in question? There is no ac¬ 
cepted principle either of equity or of finance applicable to 
such a case. When a business or a trade is prosperous, and 
earning large profits which normally would pass to its share¬ 
holders in high dividends, how is the demand for a rise in 
wages to be decided? The workers, let us say, are already 
in receipt of a wage adequate to maintain their current stand¬ 
ard of living, and as much as is obtainable in other trades 
demanding the same amount of skill and energy. What is 
their equitable claim upon a surplus that is due, either to the 
skilful management of this industry, or to the cheapness of 
its raw materials, or to the rapid development of new mar¬ 
kets enabling a larger product to be sold at a higher price, or 
to a trade agreement to restrict output in order to raise 
prices? If the surplus profits are due to the first of these 
causes, superior management, the workers have no obviously 
equitable claim upon them as against the shareholders: if 
they are derived from any of the other sources, they seem to 
represent a corresponding loss to other trades or to the con¬ 
sumers who are called upon to pay the higher prices, i.e., to 
exchange a given quantity of their produce for a smaller 
quantity of the produce of the prosperous trade. The sur¬ 
plus is a sum in excess of the economically necessary re- 


ECONOMIC HARMONY AND DISCORD 177 


muneration of the capital and labour in the business or trade, 
and there is no equitable rule for its apportionment as be¬ 
tween dividends and wage-rates. ‘Why should the workers 
in this business be paid more than the workers doing the 
same sort and amount of work in another less prosperous 
business in the same trade?’ or, ‘Why should the whole body 
of workers in a prosperous trade claim for themselves a sur¬ 
plus which is got by charging higher prices to workers in 
other trades for the goods these latter purchase with their 
wages?’ It is manifest that such surpluses cannot be appor¬ 
tioned to the capital and labour of the particular business or 
trade where they emerge, on any principle of justice. 

Or, take the converse case, that of a business or industry 
which makes not a surplus but a deficit, i.e., a gross income 
insufficient to pay its capital and labour the market rates. 
A claim by the employers for a reduction of wages upon the 
ground that their funds are inadequate to pay the current 
rates is countered by the workers’ plea that the proposed 
reduction is a ‘sweating’ rate, an ‘unfair’ wage. The em¬ 
ployers press a point of equity, viz., that as the workers get 
a share of trade prosperity in higher wages, so they should 
share adversity by taking lower wages. The workers natur¬ 
ally retort that other economies in costs should take prece¬ 
dence of wage-reduction. But where no other adequate cut 
in costs can be made, they will not infrequently acquiesce in 
a temporary wage-reduction, or a short-time policy equiva¬ 
lent to wage-reduction. What other decision could an arbi¬ 
trator reach, in adjusting a financial situation like this? 
The prima facie equity of dividing losses is backed by stern 
financial necessity. On the assumption that each business 
and each trade must always pay its way out of its own earn¬ 
ings, and is entitled to all that it can secure in the operations 
of the market, there can be no rational or equitable rule for 
dividing either the surplus gains or the losses between the 
capital and labour in a trade or business. Industrial peace, 


178 ECONOMIC HARMONY AND DISCORD 


in other words, is quite impracticable, from any standpoint 
of principle, so long as the legal status of a business as an 
absolutely self-sufficing financial unit is accepted as the 
basis of judicial reference. The common experience of arbi¬ 
tration in such trade disputes bears out this diagnosis, for 
though principles of equity are sometimes cited, every arbi¬ 
trator recognises that his real task is one of sheer compro¬ 
mise, winning the acceptance of both sides to some more or 
less ingenious splitting of the difference. 

§ 6. So far we have assumed that the problem of peace in 
industry lay in a satisfactory adjustment of the conflicting 
claims of employer and employee in the several trades or 
businesses. In our analysis we have shown how impracti¬ 
cable any sound adjustment is upon this separatist basis. 
The interaction of businesses and trades through the 
machinery of markets, or, in other words, the social deter¬ 
mination of values, is seen to be the operative cause of this 
failure. Businesses are legally, financially, and practically 
regarded as independent, self-determinant beings, whereas in 
reality they are no such thing. The success or failure of a 
business, or a whole trade, its ability to pay high or low wages 
and dividends, depends far more upon what is happening in 
the economic system as a whole than upon any actions within 
its own separate control. This consideration gives a new 
and larger significance to the economic struggle. It is seen 
no longer as a number of unrelated conflicts between capital 
and labour in the several businesses and trades for a share 
of the proceeds of such undertakings, but as a general struggle 
omnium contra omnes of all the productive units in the eco¬ 
nomic system for their share of the aggregate product of this 
complex cooperative process. The full size and significance 
of this struggle are not at first apparent. But in certain 
middle shapes and sizes it is to an increasing extent over¬ 
lapping and displacing the simpler struggle between capital 
and labour in particular businesses and single trades. The 


ECONOMIC HARMONY AND DISCORD 179 


fundamental fact that the operations of the whole economic 
system go to determine what actual payments are attainable 
at any particular point within that system comes home in 
the discovery of various other conflicts of interest beside that 
between capital and labour in the business unit. Trade 
unionists are discovering to their consternation that workers’ 
interests, as well as capitalists’, are involved in the diver¬ 
gence of interests between sheltered and unsheltered trades, 
i.e., the trades whose products command the home market, 
and are, either by natural conditions or legal protection, 
sealed against outside competition, and the trades which 
must sell their products abroad or at home at prices deter¬ 
mined by world markets. The capital and labour in shel¬ 
tered or protected trades are under strong incentives to 
cease their wasteful and inconclusive quarrels over the sur¬ 
pluses which their privileged positions enable them to ex¬ 
tract, and to seek some provisionally satisfactory apportion¬ 
ment of these between dividends and wages. When capital 
and labour in such trades are both well-organised, trusts, 
cartels, or other combinations or agreements, cancelling the 
waste of cut-throat competition and favouring limitation of 
output and fixed profitable prices, may, by judicious con¬ 
cessions to employees, make a new alignment of economic 
forces, substituting a struggle between groups of stronger 
and weaker trades for the cruder conflict between capital 
and labour in the units of production. Even when no such 
pacific arrangements are made for organised division of sur¬ 
plus in the sheltered trades, the greater ability of organised 
labour in these trades to extract by collective bargaining some 
share of this surplus, serves to reduce their sense of solidarity 
with labour in the unsheltered trades, and to feed some feel¬ 
ing of their identity of interests with capital in the trade of 
whose prosperity they are joint beneficiaries. With the 
growing tendencies to cartelisation and rationalisation in 
staple industries, and the tariffs and other subsidies for 


180 ECONOMIC HARMONY AND DISCORD 


favoured trades, this division between sheltered and exposed 
industries plays an even greater part in determining the dis¬ 
tribution of the aggregate product, and the unfairness of a 
distribution thus determined comes home even more clearly 
to business men and workers harassed by the swift and often 
catastrophic changes in the post-war economic world. For 
it is quite manifest that no reason or equity, but just sheer 
economic force, sometimes supported by political aids, is re¬ 
sponsible for the prosperity of some trade, the adversity of 
others, enabling the former to control markets, raise prices, 
and command high profits, compelling the latter to struggle 
on, selling their goods at unremunerative rates, while obliged 
to buy the goods they need from sheltered industries at 
higher price levels. 

Industrial peace and equitable distribution are not, there¬ 
fore, attainable by arrangements of capital and labour with¬ 
in the several businesses or industries to share their takings 
on some agreed plan and to submit disputes to outside arbi¬ 
tration. For, in the first place, no satisfactory principle can 
be found for the apportionment of fluctuating gains whose ex¬ 
istence and amount are mainly determined by outside causes; 
and, secondly, such consolidation of the interests of capital 
and labour in particular trades often signifies a new align¬ 
ment of forces in the economic struggle. 

§ 7. Nor is the conflict of industries confined to that be¬ 
tween the sheltered and exposed industries. Everywhere 
and always an opposition between rural and town industries, 
agriculture and manufacture, has bred economic and political 
trouble, not only within the local and national areas, but to 
an increasing extent in the world markets. Sometimes and 
in some countries a growth of population, with rapidly in¬ 
creasing demands for food and raw materials, favours rural 
producers in the exchange of their product, though more 
often their natural advantage is offset by the superior com¬ 
bination of those who collect, carry, and market their prod- 


ECONOMIC HARMONY AND DISCORD 181 


uct. In most countries the weaker power of cooperation 
among farmers, taken in conjunction with the incalculable 
fluctuations of crops, keeps them more or less in permanent 
bondage to banks, money lenders, railroads, and distributors. 
Recent disturbances in the spheres of finance and politics 
have accentuated this conflict between country and town, and 
the apparent inability of farmers and other rural workers to 
‘hold their own’ and get their share of the general increase of 
wealth is a source of increasing discontent. This trouble is 
perhaps more keen and conscious in the United States than 
elsewhere, because there the scale is more heavily weighted in 
favour of protected manufacturers, railroads, and financiers. 1 
But in most countries a definite opposition between town and 
country is becoming a conscious factor in the economic and 
political situation. On the accepted lines of business auton¬ 
omy there exists no remedy for the manifest injustice of a 
growth of national wealth absorbed almost entirely by cer¬ 
tain favoured classes of the industrial population. Nor is 
this conflict between agriculture and town industry confined 
within the area of each country. It is in the strictest sense 
a world conflict. This aspect emerges even more distinctly 
as world markets are more fully developed for foods, raw ma¬ 
terials, and manufactured goods. In the early years of this 
century price statistics clearly indicated a ratio of exchange 
becoming more favourable to the countries producing sur¬ 
pluses of essential foods and raw materials. For reasons 
chiefly related to the disturbing reactions of the Great War 
on industry, commerce, and finance, the balance has tempo¬ 
rarily shifted against the food and raw material producing 
countries. But a restoration to normal conditions would 
seem to indicate a permanent and a progressive advantage 

1 Soviet Russia presents a special and extreme case of this antago¬ 
nism exacerbated by a State Socialism in which a backward industrial¬ 
ism fails to satisfy the reasonable claims of a peasant population in 
the exchange of goods. 


182 ECONOMIC HARMONY AND DISCORD 


to those areas of the earth whose productive activities are 
subject to 'the law of diminishing returns’, that is to say, the 
share of world wealth passing to the populations of food and 
raw material producing areas will tend constantly to in¬ 
crease. Unless a rigorous birth-control checks the growth 
of population in the world at large, or cartelisation should 
extend so far as to ration output over the main fields of in¬ 
dustry, and perhaps by a lateral extension of business organi¬ 
sation to gain control of agriculture, mining, and other rural 
activities, this obvious conflict between town and country 
must continue to spread discord in the economic system. 
For there is no accepted principle for adjusting the respec¬ 
tive claims of industries conforming to the law of diminish¬ 
ing returns and industries which do not, i.e., of determining 
the equitable price levels at which the two classes of products 
shall be marketed. The existing method of determining the 
exchange rate between these products, free competition, 
qualified by combination and natural scarcities, contains no 
security for industrial peace and equitable distribution. 

Again, a closer examination of town industries will dis¬ 
close other oppositions of interest, temporary or permanent, 
based partly on the relative importance of the goods or serv¬ 
ices these industries produce, partly upon organised limita¬ 
tions in the supply of the capital or labour they employ. 
There is at present in Britain adversity in many important 
industries, largely, though by no means exclusively, devoted 
to foreign markets, such as cotton, wool, coal, iron and steel, 
shipbuilding, and railroads. There is prosperity in drink, 
tobacco, motor cars, electrical apparatus, artificial silk, bank¬ 
ing and insurance, drapery, and many other retail trades. 
The economic causes of these gains and losses lie for the most 
part outside the control of the several businesses in these 
trades, sometimes in prices of raw materials or alterations 
in demand, or in new processes of foreign competition af¬ 
fecting favourably or adversely certain businesses in these 


ECONOMIC HARMONY AND DISCORD 183 


trades, or the trades as wholes. Again, the larger margin 
between wholesale and retail prices in general indicates a 
new conflict or divergence of interests either between the 
manufacturing and distributive trades, or between retailers 
and the consuming public. The solidarity of the interests 
of the workers is manifestly broken by these new alignments. 
Real wages and conditions of labour are conspicuously better 
in the sheltered than the unsheltered trades, and in trades 
which for other reasons above cited are in a favourable posi¬ 
tion to command high prices for their goods and services. 
Though no close criterion exists for estimating the relative 
amounts of skill and effort given out in the various kinds of 
labour, it will generally be admitted that in some trades, e.g., 
building, printing, and most municipal employments, labour 
is a good deal better paid and conditioned than in most other 
occupations not less skilful and onerous in their demands 
upon the employees. This signifies, of course, a power in 
the stronger and better organised workers to reduce the real 
wages of weaker or worse organised workers in other trades 
by higher labour costs which raise the prices of the goods and 
services upon which wages are expended. 

§ 8. This analysis of divergent interests might be carried 
into further detail. But enough has been said to indicate 
the large number and variety of group discords within the 
economic system, produced by a social determination of val¬ 
ues and prices which is regulated by arrays of economic force 
and not by any principle of distributive justice or regard for 
human welfare. For just as there exists no rational rule for 
determining a ‘fair wage', or an equitable apportionment of 
the gains of a prosperous business between dividends and 
wages, so with the other conflicts of interest which our analy¬ 
sis discloses. Why should a skilled farm labourer be paid 
less than half the wages earned by a bricklayer, or a com¬ 
positor take twice or three times as much out of the social 
pool of wealth as a shop assistant? Why should the capi- 


184 ECONOMIC HARMONY AND DISCORD 


tal invested in banks or breweries be remunerated at a 
higher rate than the capital invested in cotton mills or tan¬ 
neries? Or, taking a broader view of the economic situation, 
why should the general level of wages be so much higher in 
the United States than in Britain and Germany, and the 
level in these latter countries be so much higher than those 
paid for the same amount of labour-output in China or India? 
Quite intelligent answers can be made to such questions, but 
they all consist of explanations of the relative bargaining 
power of labour and of capital in the different industries and 
countries, treating the problem of distribution of wealth en¬ 
tirely as a problem of balance of power. The assumption 
everywhere is that each man, or group of men, capitalist or 
worker, takes out of the general pool of wealth as much or as 
little as the strength or weakness of his economic situation 
enables him to get. Though such terms as ‘fair wages’, ‘rea¬ 
sonable profits’, ‘equitable charges’, imply some sense of 
justice and regard for the interests of others as appertaining 
to the operations of the business world, they are always loose, 
fragmentary applications of an ethics which has no clearly 
intelligible meaning or authority. 

§ 9. Yet, as we have recognised, most thoughtful business 
men are apt to hold, with their intellectual advisers, the 
economists, that on the whole the economic system deals 
‘substantial justice’. Even those conflicts of interest, those 
maladjustments, those manifest unfairnesses, which we have 
cited, are flaws or friction in the operation of a system which 
as a whole works harmoniously and beneficially to all con¬ 
cerned. Most of them are temporary disturbances, natural 
and inevitable in a growing organism, and are rectified in 
process of time by self-adjusting processes within the eco¬ 
nomic system. If capital, or labour, or both, be remunerated 
at a higher rate in some occupations and some countries than 
in others, the intelligent self-interest of investors and workers 
will place larger supplies of capital and labour in those 


ECONOMIC HARMONY AND DISCORD 185 


favoured occupations and countries, smaller supplies in less 
favoured ones. Thus a just balance will be restored. This 
natural adjustment, it is added, is made quicker and more 
accurate by the spread of education and of reliable economic 
information among all classes, and especially in those busi¬ 
ness quarters where the main currents of new financial and 
industrial power are concentrated for control. The modern 
organisation of finance in great world centres, acting in ever 
closer, quicker contacts, is in effect an establishment of that 
unitary regulator of the economic system which seems so de¬ 
sirable. The suggestion is that an economic system thus 
controlled by groups of powerful business experts, actuated 
directly by the desire of financial gain, will realise that har¬ 
mony and solidarity of human interests of which the early 
economists had dreamed. 

When doubts are expressed whether this distinctively 
financial object of the economic governors accords with that 
utilisation of productive resources most conducive to the 
prosperity and welfare of mankind, it is sometimes urged 
that experience shows in business potentates a diminishing 
interest in the merely money-making function and an in¬ 
creasing interest in the art of successful government. In 
other words, a sense of social service qualifies, or even dis¬ 
places, that desire of gain which otherwise might mar the 
process of disinterested economic government. As great in¬ 
dustry and its attendant processes of transport and commerce 
shed the friction, waste, and instability of the older competi¬ 
tive struggle, and become organised, consolidated, rational¬ 
ised, and standardised by the conscious informed control of 
a single directing finance, with due regard to local and in¬ 
dustrial autonomy, proper provision will be made for the hu¬ 
man casualties involved in the readjustments of structure 
which every improvement of technique, and every shift of 
markets, involves. 

Adam Smith’s ‘invisible hand’ has become a conscious 


186 ECONOMIC HARMONY AND DISCORD 

financial providence: all real initiative is taken away from 
the private individual will and is exercised from great central 
power houses. Before endeavouring to assess the signifi¬ 
cance of this new economic government in terms of human 
equity and welfare, it is, however, well to realise the present 
limitations of its scope. Effective combination, rationalisa¬ 
tion, and financial government, though advancing rapidly in 
the most developed capitalistic countries, do not even there 
exercise a close control over the majority of economic activi¬ 
ties. Individual enterprise and competing businesses still 
cover the greater part of the economic field. Agriculture 
and other rural industries, many minor manufactures, some 
major manufactures especially in textiles and metals, many 
handicrafts, large sections of retail trade, even in Britain, 
the United States, and Germany, still preserve large elements 
of this old competitive character, though often their free¬ 
dom is impaired by outside financial control. In the less de¬ 
veloped countries financial penetration and organisation have 
as yet little grip over the major provinces of economic activ¬ 
ity, though everywhere they are advancing. 

§ 10. From these considerations it follows that a more or 
less definite conflict is set up between the organised and ra¬ 
tionalised industries, with powerful financial backing, and 
the weaker, less organised competing businesses which still 
prevail numerically in most countries. Full adequate gov¬ 
ernment of expert central finance, the money power, is there¬ 
fore, at present, far from possessing the ability to mould the 
economic system by its central will so as to convert it into 
a harmonious working whole. But even were the dreams of 
‘William Clissold’ to be realised by the establishment of a 
self-appointed aristocracy of scientific and business experts 
in control of the economic world, the problem of the recon¬ 
cilement between economic and human values is not neces¬ 
sarily solved. For two discrepancies may still reveal them¬ 
selves. The first is a particular form of the old objection to 


ECONOMIC HARMONY AND DISCORD 187 


oligarchies, viz., their preference of their own interests to 
those of the people in whose name they govern. Does ex¬ 
perience support the presumptions either that the wielders 
of financial power will always recognise that their profitable 
interests are identical with the good of the whole business 
community, or that, where they perceive some divergence, 
they will prefer the common interest to their own? In other 
words, will they be impelled to use finance for the sole and 
express purpose of developing industry and commerce along 
the lines most advantageous to the community, or will in¬ 
stances arise where these social gains will be sacrificed to the 
larger and more immediate gains of financial coups profitable 
only to the manipulators of market values or the promoters 
of tempting but unsafe investment? We can only urge that 
the entire trend of experience is against the supposition that 
the determination of the good of a whole community can 
safely be left in the hands of a self-elected oligarchy, prima¬ 
rily interested to enjoy the gains and power of their position. 
To rest the cause of economic harmony and prosperity upon 
the old claim of a benevolent despotism will hardly satisfy 
any school of serious thinkers. 

§ 11. Investigation of the actual working of the economic 
system thus discloses a variety of conflicts of interest for 
which there seems to be no satisfactory principle of settle¬ 
ment. In order to understand why this is so, we must, how¬ 
ever, dig deeper into the source of mischief. In the first 
place, we should recognise the reality of an economic har¬ 
mony in the operations of the system which maintains an ef¬ 
fective cooperation of multitudes of people in different coun¬ 
tries for the regular supply of goods and services to satisfy 
the ordinary requirements of a vast and varied public. 
When we contemplate the elaboration of this system of sup¬ 
ply, and the delicate mechanisms of commerce and finance 
that sustain and direct its activities, we may well marvel at 
the success it has achieved. For certain purposes and within 


188 ECONOMIC HARMONY AND DISCORD 

certain limits it is, indeed, a remarkable testimony to the 
reasonableness of mankind. No other social institution has 
been carried to anything like its degree of complexity and 
reliability of working. The art of political government, even 
within the limits of a nation state, is crude in comparison, 
and beyond those limits is infantile. In fact, so impressive 
are the cooperative processes of the economic system in the 
intricacy of their order as normally to drive into the back¬ 
ground of our consciousness those very defects and discords 
upon which we have just been dwelling. In order to keep 
the balance true it is, therefore, desirable definitely to pose 
the problem, how much harmony and how much discord? 

The conditions of a perfect harmony have in part been in¬ 
dicated above in our account of the ideal of an individualistic 
laissez faire economy. If every owner of productive re¬ 
sources, labour, capital, land, ability, were intelligent enough 
to put his resources to their most productive use, and were 
not impeded by political, economic, or other obstacles in do¬ 
ing so, this conduct would at once be most gainful for him 
and most conducive to the gain of the community. So far 
as these conditions obtain, a natural harmony exists. Given 
intelligence, information, free mobility of persons and goods, 
equal access to all occupations, the good of each man will be 
the good of all. For many economists and social reformers 
this simple faith still survives, though somewhat shaken by 
the visible triumph of the principle of combination over that 
of competition in capitalist enterprise. 

§ 12. But though, as we see, combination in capital and in 
labour has brought new conflicts into the economic world, 
the real element of discord lies deeper. It is not true that 
under the fullest freedom of competition enlightened selfish¬ 
ness would secure economic peace and equitable distribution. 
It would only do this in a community where economic condi¬ 
tions were static, and where the whole of the product was, 
therefore, absorbed in necessary costs of production. Where 


ECONOMIC HARMONY AND DISCORD 189 


the arts of production and consumption were matters of fixed 
custom and routine, the whole product would either be just 
sufficient for the physical maintenance of the population en¬ 
gaged in producing it, and for the replacement of the simple 
tools and other capital employed, or, if it exceeded this 
amount, would be absorbed in conventional consumption out¬ 
side bare physical subsistence, or in leisure. The only quali¬ 
fication to be made is that, of any product in excess of the 
physical requirements of the growing population, some por¬ 
tion would be allocated to the preferential claims of chief, 
priest, or medicine man. But, speaking generally, when no 
surplus emerged, the current income would be peaceably and 
harmoniously distributed for the maintenance of the pro¬ 
ducers in accordance with a natural or conventional rule. In 
societies where economic conditions are either absolutely 
static, or change very slowly, this essentially harmonious 
state still prevails. The product is absorbed in necessary 
costs of continued production. When population tends freely 
to increase, the product goes in bare costs of maintenance: 
where it is checked, some slow rise in a standard of comfort 
may take place. But the point is that such a standard, with 
any conventional increments it may contain, is at any given 
time a necessary inducement to the giving out of productive 
energy. It is true that any conventional accretion to physi¬ 
cal subsistence may be eaten away gradually by adverse 
economic forces, and the resistance to such loss may evoke 
conscious discontent. It may even lead to a loss of fertility 
and eventually an extinction of the population. But this is 
not the actual problem that confronts us. Accepting the 
provision that, for any given society at any given time, there 
exists a standard, or a number of standards of life, the main¬ 
tenance of which is a necessary incentive to the output of 
productive energy, the economic system by a virtually auto¬ 
matic method makes provision for these costs in the distribu¬ 
tion of the product. Here is a pacific harmony. If these 


190 ECONOMIC HARMONY AND DISCORD 


costs, whether of the upkeep of capital or of labour, or of the 
fertility of the land, were withheld, the system would soon 
come to a standstill. Out of the general product these costs, 
the expenses of maintenance, must be met, and it is to the 
general interest that they should be met. 1 But when the 
arts of industry are so improved that a growing surplus is 
produced beyond these costs of maintenance, there exists no 
natural or automatic rule for its disposal. It is not a neces¬ 
sary incentive to evoke the activities which produce it. If, 
as some argue, it is attributable exclusively to the skill, crea¬ 
tive capacity, and industry of a few inventors and their 
business exploiters, it cannot for the most part be regarded 
as a necessary payment to these men for their services. In 
point of fact such attribution of the fruits of economic prog¬ 
ress to a few individual brains is an unsound analysis of the 
origin of these values. But, in any case, the growth of 
wealth in the economic system far exceeds any remuneration 
needed to evoke the scientific and technical improvements 
from which it proceeds. In a word, we here confront a large 
and increasing product for the disposal of which no natural 
automatic provision is made in the working of the economic 
system. Contrasted with the ‘costs’ it may be regarded as 
an ‘irrational’ element in the system. It belongs nowhere 
by necessary law. It is the prey of the stronger: it goes to 
those whose natural or contrived economic forces enable 
them to take it. It is here that we reach the real roots of al¬ 
most all the diverse forms of economic conflict. When some 

1 This statement must not, however, be taken to imply that a re¬ 
liable provision always exists, even in what we term a ‘static’ society, 
for the full subsistence, or efficiency wage, of all its members. The 
automatic or necessary distribution only extends to bare subsistence, 
and shortsighted greed or some unforeseen emergency may for a time 
let down the economic system at some points even below that level, 
to the damage of the system as a whole. A sweating economy may 
thus be practicable for a time, lowering the vitality and productive 
powers of the society as a whole. Continued upon any considerable 
scale, this would represent not a static but a retrograde economy. 


ECONOMIC HARMONY AND DISCORD 191 


portion of this surplus emerges in the higher prices, profits, 
and income of a business or a trade, or of the economic sys¬ 
tem as a whole in periods of great activity or progress, a 
struggle for its possession takes place, between capital and 
labour, trade and trade, producer and consumer. Schemes 
of conciliation, arbitration, or proportionate division of these 
spoils cannot achieve a really satisfactory settlement of such 
disputes. For neither of the parties directly committed to 
such struggles can be deemed to have any equitable claim to 
a surplus whose existence is not due to any effort or skill in 
either party, but to a natural, fortuitous, or contrived scar¬ 
city, or abundance of supply, which has enabled larger gains 
to be obtained. 

§ 13. This distinction between costs and surplus is, of 
course, no novel one. It emerged with the formation of the 
Political Economy of the eighteenth century, and in various 
shapes has persisted as a part of economic theory. It was 
first incorporated in the doctrine of the sole productivity of 
nature, the net produit of the physiocratic doctrine. It took 
root in our classical political economy in the Smith-Ricardian 
rents of land, differential and specific. 1 But long before the 
gathering of any coherent body of economic doctrine certain 
elements of excessive profits from public concessions or trad¬ 
ing monopolies gave substance to this notion of surplus earn¬ 
ings. Monopoly or scarcity prices, due to manipulation of 
markets, were common grievances in medieval society. The 
modern economists, alike upon the Continent and in Britain, 
were reformists in regard to all such monopolies and privi¬ 
leges. They were ‘abuses’ in the laissez faire competitive 
order, to be got rid of as soon as practicable. But rents, 
based on the niggardliness and inequalities of nature, re- 

1 By specific rent is signified the positive rent yielded by the worst, 
or marginal, land in use for some particular purpose, e.g., the worst 
hopland in Kent, or the worst building site in a particular town. This 
is Adam Smith’s scarcity rent, not acknowledged in Ricardo’s theory, 
but restored by later economists. 


192 ECONOMIC HARMONY AND DISCORD 


mained a permanent surplus, unearned by those who owned 
the land, and a suitable source of public revenue. The fixity 
of land and the visible appreciable growth of values and in¬ 
comes from its ownership, together with the political and 
social prestige and power attached to landlordism, combined 
to give dramatic prominence to this feature of the economic 
system. Industrial and commercial capitalism found in 
landlordism a convenient scapegoat for all economic sins, 
and successful business men were satisfied that all their 
profits, however large, were the earnings of their industry 
and enterprise, economically and morally distinct from rents 
which flowed in “while men slept”. In the acrimonious 
struggle between industrialists and landowners in England 
during the mid-nineteenth century political economists dis¬ 
played as little consciousness as did industrials of any un¬ 
earned, unneeded ‘surplus’ in the almost fabulous profits of 
Lancashire factories. Such fortunes appeared as the legiti¬ 
mate prizes and inducements to thrift and enterprise, or else 
as merely temporary gains of prosperous times to be offset 
by losses during periods of depression and adversity. 

This complacent view of capitalism was confirmed among 
sober thinkers by the undiscriminating violence of the new 
proletarian economics of which Marx was high prophet. 
Here the fact of central, almost sole, importance was the en¬ 
forced sale of labour-power on terms enabling the capitalist- 
employer to make a surplus gain from each purchase. Sur¬ 
plus here acquired a new meaning, which threw into the 
shade all earlier ones. It was the value represented by the 
difference between the payment of subsistence wages to the 
worker and the sum obtained by selling in the market 
the product of his labour. Or expressed in terms of work¬ 
time, the worker in the first few hours of his working-day 
produced an output equivalent in selling price to the wages 
paid him for a full day’s work. His output, or produce, dur¬ 
ing all the subsequent hours constituted a ‘surplus’ which his 


ECONOMIC HARMONY AND DISCORD 193 


employer appropriated. This iron law of wages, with slight 
modifications, has continued to be the representative expla¬ 
nation of the economic tyranny and injustice of The capitalist 
system’ and to the general body of socialists and trade- 
unionists this analysis virtually confines the notion of 'sur¬ 
plus’ to the profits which capitalist-employers 'make out of 
labour.’ 

Though not denying the part played by an inert landlord¬ 
ism in making unearned gains, the active 'profiteering’ in the 
world of industry and commerce figures so dramatically 
among class-conscious proletarians as to dwarf the element 
of rent and to identify surplus with profits made by under¬ 
paying labour. In scientific socialism, still more in the popu¬ 
lar rendering of socialist doctrine, the crude presentation of 
a theory which imputes to each capitalist-employer the 
power to take and keep so large a share of labour’s product 
in face of his competition with other capitalist-employers, 
and which ignores all other pulls and squeezes in the eco¬ 
nomic system, has actually served to weaken the force of a 
more discriminative criticism of that system. The exaggera¬ 
tions of the Marxian attack, by failing to distinguish between 
the payments economically necessary under capitalism to the 
providers of capital and organisation and payments in ex¬ 
cess of these amounts, have served to obscure the vital dis¬ 
tinction between costs and surplus. Nor can it be said that 
this defect is remedied by the introduction by Marshall and 
his school of the faltering term 'quasi rent’ to indicate the 
extra payments taken by those who find themselves in 
possession of some factor of production or some commodity 
endowed with a temporary scarcity value. If there is a 
house-shortage, as in many cities after the war, the owners of 
existing houses or house-leases are in a position to take ad¬ 
vantage of this shortage (when the law does not interfere) 
and charge selling prices or rents higher than those that will 
prevail when sufficient capital and labour have been drawn 


194 ECONOMIC HARMONY AND DISCORD 


into the building industry to restore a normal balance of sup¬ 
ply and demand. So also the owners of the existing plant in 
any industry, for whose product some large new market 
quickly opens out, are able for a time to earn profits far 
above the level they can maintain when new firms set up 
with new plants and enter into competition in their market. 

There is no reason for appending the qualifying term 
‘quasi’ to these ‘rents’, if the term rent indeed be chosen to 
describe all differential and specific surpluses. The fact 
that in many cases these extra prices are due to adventitious 
circumstances, are of no long duration, and are direct 
causes for their own disappearance by stimulating an in¬ 
crease of supply, is no reason for refusing to recognise these 
extra prices as true economic surpluses. Some of these 
shortages are, indeed, chance products and short-lived. But 
others are not. In high-tariff countries there are well-or¬ 
ganised industries able to secure for their invested capital a 
normal rate of profit far in excess of the free market rate. 
Even in Great Britain there are industries, such as banking, 
brewing, and tobacco, where competition is so attenuated 
that surplus profits, though fluctuating in amount, are a 
normal feature of the industry. Nor are these surpluses 
confined to the ownership of certain kinds of land and capi¬ 
tal. Artists, actors, writers, singers, inventors, lawyers, 
surgeons, and other owners of valuable personal qualities or 
reputations, are often able to charge prices for their services 
far in excess of what they could obtain, and would be willing 
to accept, under freely competitive conditions. The fee 
charged by a surgeon of high reputation in London or New 
York for a major operation would probably be four times as 
large as would be paid to a surgeon of equal skill in Stock¬ 
holm or Zurich. For similar reasons great singers and ac¬ 
tors can obtain higher salaries in New York, Buenos Ayres, 
and Rio, than in any European city. While nearly all these 
personal rents of ability are short-timed surpluses, so long as 


ECONOMIC HARMONY AND DISCORD 195 


they exist they are as true surpluses as are the rents of city 
sites, which, though generally more durable in size and 
growth, are also liable to fluctuations and depressions with 
movements of population and of local trades. Finally, as we 
have already noted, not only the capital but the labour em¬ 
ployed in certain trades may secure wage rates which contain 
an element of surplus. This is the case in sheltered trades 
where the labour market is well-organised and protected 
against free access from lower paid workers. It may even 
be said that the whole condition of skilled organised labour in 
America carries in its wage-rates what from the standpoint 
of world-economy is an element of surplus. 

§ 14. The fact that many of these surpluses are difficult 
to trace and measure does not prevent them from being a dis¬ 
turbing factor in the economic system. Those economists 
who refuse to extend their idea of rent outside the Ricardian 
line sometimes choose to regard all other excess payments 
either as negligible by reason of their evanescence, or as 
serviceable inducements to special outputs of energy or enter¬ 
prise, i.e., as true costs. But neither of these positions can 
be maintained. Such durable surpluses as we have cited are 
assuredly not negligible forms of waste and conflict, while, 
although prizes may reasonably be taken to act as incentives 
to certain types of productive effort, it cannot for a moment 
be argued that the amounts and duration of the excess- 
profits that emerge in industry are determined in amount by 
any economy of ‘motives’. It is then of the first importance 
to realise the common origin and nature of these surpluses, 
how it is that all of them usually represent the use of some 
natural, contrived, or fortuitous ‘scarcity’ 1 enabling the own¬ 
ers of some factor of production to extract a higher price than 

1 Even where abundance, not scarcity, appears to be the immediate 
cause of surplus gain, as in the case of a good harvest, or a rich oil field, 
that abundance, in order to be a source of surplus gain, must be re¬ 
stricted in extent and ownership. 


196 ECONOMIC HARMONY AND DISCORD 


is necessary to maintain or evoke a sufficient supply of the 
factor in question. 

The recognition of the nature of surplus and its proper 
treatment is vital to any successful attempt to secure an 
equitable economy. I spoke of it as constituting the irra¬ 
tional’ element in the economic system. But here some mis¬ 
understanding is likely to arise. There is a sense in which 
the economic surplus is entirely rational. The actual income 
of wealth it represents proceeds from those improvements in 
the arts of industry which human reason achieves, and which 
give rise to more productivity than is needed to maintain the 
productive agents. Thus regarded, this economic surplus 
is the sole source and substance of economic progress. Its 
irrationality lies in the defective provision for its serviceable 
distribution. That distribution, as we perceive, operates by 
a process of economic pulls, representing the proportionate 
strength of the claimants, and nowise contributes to the pro¬ 
duction of the surplus, or the capacity to make good use of 
it. In the end, the organisation of these economic pulls often 
involves a limitation of output or other restriction of eco¬ 
nomic services, which certainly reduces the aggregate amount 
of surplus, in order to strengthen the bargaining power of the 
organiser of a deal. 

The economic system, as administered at present, thus 
makes no adequate provision for the rational and equitable 
use of surplus wealth. And yet its true functions are clearly 
discernible. It has, indeed, three distinguishable though re¬ 
lated functions. The first is to supply the saving fund for 
the enlargement and improvement of the productive fabric 
of capital and labour. A portion of the product which re¬ 
mains after all necessary costs of maintenance are met 
should manifestly pass in due proportions to the growth and 
betterment of the productive resources. The claims of a 
larger and a more efficient body of workers are here placed 
upon the same footing with the need for larger and better 


ECONOMIC HARMONY AND DISCORD 197 


supplies of plant, materials, and other capital requirements. 
The ‘saving’ represented in improved hygiene and education 
of the workers is strictly inseparable from the value of the 
new capital put into industry, for the effective utilisation of 
new and better technical equipment largely depends upon 
the larger supply of more efficient labour. 

The second function of a surplus overlaps the first and yet 
demands separate attention. Economic efficiency is only a 
part and not the chief part of a sound progressive personal¬ 
ity. Nor does personal progress hinge mainly upon sound 
economic conditions of life. But from the sphere of eco¬ 
nomic activities contributions can be made to personality 
which are not expressed primarily, if at all, in increased or 
improved economic efficiency. A portion of the economic 
surplus may, therefore, be withdrawn from the economic 
field, in order to enrich the organic life of the personality as 
a whole. The cancelment of some surplus in the cause of 
leisure, the shortening of the working-day, is an example 
of this use. There are many others. For even those uses of 
‘saving’ to improve the conditions of hygiene and education, 
though, as we see, contributory to economic efficiency, do not 
find their sole or chief utility in this field. Better health 
and higher intelligence will obviously find their chief gain in 
the wider fields of human welfare. Indeed, no better proof 
could be given of the need of a conscious control of economic 
processes, in the interests of human welfare conceived as an 
organic whole, than this claim to override the narrower im¬ 
mediate demands upon the surplus for economic ends, with¬ 
out due regard to the larger human ends which it may serve. 

Finally, it is convenient to regard the complete economic 
surplus as the fund on which the State and other forms of the 
organised community may draw for the economic mainte¬ 
nance and improvement of the non-remunerative services that 
serve the common life. Whether we hold that community is 
a human value in itself, as distinct from personality, or is 


198 ECONOMIC HARMONY AND DISCORD 


only a means for the enrichment of personality, we cannot 
fail to recognise that, with the growth of modern civilisation, 
there is a growing tendency for organised communities to 
claim for the support of their activities an increasing amount 
of revenue, and this they seek to draw, as far as practicable, 
from funds which by our analysis would rank as surplus. 
When we discuss the moral rights of the State in relation to 
the economic system, we shall see how much hinges on the dis¬ 
covery of a taxing system which interferes as little as possible 
with costs, and applies itself with skill to methods of ensuring 
that the true incidence of all taxation is on surpluses. 

§ 15. One possible misconception remains to be cleared 
away. It may be urged that the discords and the waste in 
the working of the economic system, to which so much promi¬ 
nence is given in our analysis, are not inherent in that system 
but are due chiefly, if not entirely, to the ignorance, folly, or 
perversity of certain sections of the community who seek to 
interfere with the operations of economic laws. There is, 
so runs the argument, a real harmony extending even to the 
utilisation of our ‘surplus’. For the three legitimate services 
to which the surplus can be put are in fact provided out of 
it. The profits of successful industries, rents, and other un¬ 
earned elements in large incomes furnish the bulk of the 
savings that enlarge and improve the material fabric of capi¬ 
talism. Practically the whole of the fund of new capital is 
drawn from ‘surplus’. So, likewise, the higher standards of 
life, the material condition of a higher personality, the sec¬ 
ond of our uses, are actually attained for the majority of the 
people of civilised countries from this same source. Finally, 
the governments of every progressive community are taking 
by taxation a larger share of surplus wealth and income for 
the public services. Admitting, then, that, out of the gen¬ 
eral product the costs of maintenance of capital and labour 
are provided by a regular, necessary routine, while the sur¬ 
pluses, however gotten in the first instance, find their way 


ECONOMIC HARMONY AND DISCORD 199 


into serviceable channels, may we not revert to the belief 
that economic laws, conformable to a nature that includes 
humanity, direct the operations of the economic system in ac¬ 
cord with the just requirements of the community? Others, 
while regretting the existing inequality in the distribution 
of wealth, seem to regard it as a necessity in the working of 
our economic system, and fortify themselves by Pareto 
curves which claim to prove that no substantial changes take 
place, or can take place, in the distribution of income among 
the different income levels. 

These arguments all hark back to the comfortable doctrine 
of a natural harmony, in the light of which all alleged con¬ 
flicts and discontents are attributable to human folly and 
wickedness. In reasserting the validity and importance of 
our distinction between the rational apportionment of costs 
and the irrational apportionment of surplus, we first take 
issue with the contention that the existing distribution makes 
a sound social provision for the application of surplus through 
the prescribed channels. It is incontestable that the eco¬ 
nomic surpluses, in their emergence as income, measure not 
productive services rendered by their recipients, but strength 
of bargaining due to natural, contrived, or fortuitous scar¬ 
city. Now these methods of acquisition necessarily affect 
their use. In the first place, there is no economic influence 
directing the flows of these surpluses into the channels which 
we recognise as socially serviceable. Large parts of these 
surpluses notoriously are expended by their recipients in 
luxurious and wasteful extravagance, directly injurious to 
the personality of their owners and their immediate entou¬ 
rage, and indirectly by example to the whole society. Again, 
of the surplus which finds its way through saving into capital 
investments there are no sufficient guarantees in the processes 
of such saving for a socially advantageous distribution of 
new capital among the various channels of investment. Nor, 
again, is there any regulation of the right proportion between 


200 ECONOMIC HARMONY AND DISCORD 


the total saving fund and the other two serviceable uses of a 
surplus, a rise in the general standard of living, and an en¬ 
richment of the economic life of the community. The actual 
application of the surplus is governed by the individual and 
fluctuating tastes, caprices, and valuations of the recipients, 
qualified by the skills and cunnings of financial exploiters, 
and the fears, greeds, and daring of statesmen in charge of 
the public finances. 

The forcible, inequitable, irrational origins of those sur¬ 
pluses thus exercise a damaging reaction on the uses to which 
they are put. As elements of discord they wield a two-fold 
influence. In origin, as they emerge in rents, profiteering, 
and other price extortions, they evoke hostility and struggle 
between capital and labour, landlord and tenant, producer 
and consumer, and between the various trades and labour 
groupings in their dealings with one another. Again, since, 
as we see, their application to the several economic purposes, 
extravagant expenditure, capitalisation, standards of per¬ 
sonality and communal life, are not governed by any rule of 
reason, they breed discord and contention between these sev¬ 
eral claimants, and great economic disorder and waste ensue. 
Nor is the trouble confined in its effects to the partition of 
the surplus. It is liable to react injuriously on the economy 
of costs. The absence of any rational security for the appor¬ 
tionment of surplus will be seen to be a chief cause in produc¬ 
ing those trade fluctuations which bring periods of unem¬ 
ployment and under-employment to large masses of produc¬ 
tive resources thereby deprived of their wages of subsistence. 
Maldistribution of the surplus in these various ways lies at 
the root of all the wastes, discontents, and conflicts, which 
impair the operations of the economic system. The distinc¬ 
tively moral defects which the surplus expresses cannot, how¬ 
ever, be diagnosed effectively without a closer analysis of the 
nature of that bargaining process by which prices alike of 
factors of production and of commodities are determined. 


CHAPTER III 


THE ETHICS OF BARGAINING 

§ 1. The cooperative unity of the economic system is es¬ 
tablished, maintained, and regulated by an elaborate mech¬ 
anism of markets. In these various markets, where sales 
of goods and services take place, the product of this eco¬ 
nomic system, the body of wealth it creates, is distributed 
among those who have claims upon it. These claims are ad¬ 
justed in detail by processes of bargaining in which buyers 
and sellers of goods and services try each to give as little and 
to get as much as they can. Custom, or legal regulation, or 
long-time contracts, may displace bargaining as a continu¬ 
ous process in certain kinds of sale, but these are only tem¬ 
porary checks and brakes upon the regular running of the 
market mechanism. 

Remembering that what takes place in every modem mar¬ 
ket is an exchange of specific wealth by means of a pecuniary 
transaction, let us examine the actual process by which a 
market price is reached. But first let us take account of cer¬ 
tain acts of sale which lie outside the ordinary area of bar¬ 
gaining. A fisherman, with one fish in his basket, who met a 
shipwrecked sailor, starving, with a hundred dollars in his 
pocket, could, if he knew the sailor’s circumstances, get the 
whole hundred dollars as the price of his fish. If, on the 
other hand, there were two fishermen, each with a fish, and 
no Other chance of a customer before the fish went bad, the 
sailor could, by making the fishermen bid, get his fish for a 
penny, though the mean expense of catching a fish might be 
a quarter. Here we have monopoly in the determination of 

201 


202 


ETHICS OF BARGAINING 


a price, price-fixing with the maximum of economic force 
and inequality of distribution. Joseph's famous cornering 
of the wheat supply of Egypt, by means of which the whole 
population are reduced to chattel slavery, is the classical ex¬ 
ample of monopoly. Private ownership of land is every¬ 
where endowed with some element or degree of this monopoly 
power, great or small according to the opportunity an occu¬ 
pant may have of moving on to some other owner's land 
without incurring losses. This same power of price-fixing 
outside the true conditions of a market is vested in a manu¬ 
facturing trust or cartel, a transport combine, or the sole 
owner or merchant of some raw material or patent. If the 
article or service thus controlled were in the strict sense a 
necessity of life to any considerable body of purchasers, their 
price-fixing power would be identical with that of our fisher¬ 
man. For all that a man hath will he give for his life. But 
the existence of a power so unlimited is very rare. For even 
where the monopoly of a supply is absolute, the article con¬ 
trolled is rarely indispensable; recourse is open to some in¬ 
ferior alternative, or its consumption may be so reduced that 
‘the elasticity of demand’ is an effective check upon the price- 
dictation of the monopolist. The likelihood of stimulating 
some new independent source of supply, a resentful public 
opinion, the possibility of legal intervention, are other obvi¬ 
ous limitations to monopoly. But when all such allowances 
are made, it is evident that, whenever the supply of any com¬ 
modity or service is in single hands, there is a power to fix 
selling prices so as to extort a surplus. 

§ 2. 1 But does this power altogether disappear when bar¬ 
gaining takes place in a free market? A has a horse which 
he will sell for $150 or as much more as he can get; a and 
b are two men willing to buy a horse, and, having no other 
horse in view, a would go as high as $180, b as high as $200. 

i Part of this section is taken (with certain alterations) from Chap¬ 
ter IX of the author’s The Industrial System. 


ETHICS OF BARGAINING 


203 


If all the parties knew the circumstances, it is evident that 
bidding between a and b will go on until the price is driven 
up to $180, and at any point above that sum but less than 
$200, the horse will be knocked down to b. If we assume an 
equal urgency in A to sell and b to buy, the actual price 
within the limits of $180 and $200 is indeterminate. But 
wherever it is fixed, the gain of the transaction is unequally 
distributed. 

Now let us set the market differently by putting in a sec¬ 
ond seller with a different minimum price. 

A, a seller with a minimum price of $150 

g jy yy » ” ” ” ” $170 

a, a buyer with a maximum price of $180 

k n yy yy yy » ” ” $170 

B, by refusing to come into the market at less than $170, 
makes that the minimum market price, for a and b will run 
the price up to that point at once in competing to buy A *s 
horse, a, dropping out of the bidding at $180, makes that 
the maximum market price, for above that point b is con¬ 
fronted by two willing sellers and can fix his terms. Be¬ 
tween $170 and $180 there are two willing sellers and two 
willing buyers! all would take part in an act of sale at any 
point between $170 and $180 indifferently. No bargaining 
can take place between these two points. If we isolate the 
market, and assume full knowledge on both sides, competi¬ 
tion or higgling cannot fix a price. 

Now let us add a third party to each side with a separate 


reserve price. 

The market will then be thus set out 

A, 

seller with minimum price 

$150 

B, 

v yy yy yy 

$170 

C, 

j, yy yy yy 

$175 

a , 

buyer with maximum price 

$180 

b, 

„ » yy yy 

$200 

c, 

,7 yy yy ” 

$210 


204 


ETHICS OF BARGAINING 


If the bidding began at $150, there is only one willing seller 
and three willing buyers; the latter will raise the price by 
their bidding, and at $170 another seller, B, enters the mar¬ 
ket. But, as there will still be three buyers to two sellers, 
the price will rise higher until at $175 C enters in, and there 
are three sellers and three buyers. One hundred and sev¬ 
enty-five dollars is thus fixed as the minimum market price, 
for all are willing to buy and to sell at that price. Similarly, 
it can be shown that $180 is the maximum price, for at any 
point above there are more willing sellers than buyers, and 
the odd seller, afraid of being left out, will keep the price 
from rising above $180. The market price must stand be¬ 
tween $175 and $180, but may stand anywhere between, and 
there is nothing in the process of bargaining to determine 
where. 

In either of these two markets the price-point between the 
minimum and maximum must be reached by extra-economic 
means: the parties must Toss up\ This is on the assump¬ 
tion that all the parties have full knowledge of the respec¬ 
tive valuation of all the buyers and sellers. In point of 
fact bluff, based on ignorance, and not chance, would usually 
fix the price-point. It is evident that we may add a fourth, 
a fifth, or any limited number of competitors to the supply 
or demand side of this market without affecting, save in de¬ 
gree, this method of determining price. The larger the num¬ 
ber of competing buyers and sellers, or the nearer their re¬ 
spective valuations to one another, the closer will be the up¬ 
per and lower price limits within which the price-point, the 
actual market price, should fall. But unless there is an in¬ 
finite number of units of supply and units of demand, or un¬ 
less the valuations of the determinant buyers and sellers 
should happen to coincide, the process of bargaining by it¬ 
self could never reach a price-point. Now, in the applica¬ 
tion of economic theory to economic price, the recognition of 
this fact is of great importance. Let us formulate it thus: 


ETHICS OF BARGAINING 


205 


‘So long as the number of willing buyers is equal to the num¬ 
ber of willing sellers no movement of price can occur, and 
within the limits of this equality of supply and demand no 
price-point can be reached’. 

‘Increase the number of buyers and sellers, approximate 
their expense of production and their purchasing power, re¬ 
duce the size of the units of supply, the competition becomes 
closer, and the upper and the lower margins nearer together. 
But except in an ideal market they do not touch. There re¬ 
mains an unearned gain distributed by chance or force.’ 

And yet in practice we constantly see market prices reached 
and changed by means of bargaining. 

The theory of the determination of a market price, as 
commonly set out in economic textbooks, starts with an as¬ 
sumption of an infinite divisibility of supply. It is evident 
that, if instead of our market for live horses, we put a mar¬ 
ket for dead horse-flesh selling by the pound, the bargaining, 
even in so small a market as we provided, would bring the 
upper and lower margins of price so close together that the 
difference might be negligible, and so what was to all intents 
a price-point might be got by mere bargaining. 

In highly organised free markets, where goods are closely 
graded and minutely divisible in units of supply, this irra¬ 
tional element in price-fixing may virtually disappear, and 
price-points be attained by bargaining between a number of 
sellers and a number of buyers. 

But, as our examples indicate, the attainment of a mar¬ 
ket price by such bargaining by no means indicates that the 
distribution of the advantages of the sale at such a price is 
equal, either as between the body of sellers and the body of 
buyers, or for the separate sellers and buyers. In such 
‘free’ markets price-fluctuations constantly occur, which 
shift the balance of advantage to one side or other, a rise of 
prices favouring the sellers, a fall the buyers, due in either 
case not to the merits of the two parties, but to circum- 


206 


ETHICS OF BARGAINING 


stances affecting the respective volumes and pressures of 
supply and demand over which the parties to this market 
have little control. Again, among the sellers on the one 
hand, and the buyers on the other, the price reached will rep¬ 
resent, as we see, widely different rates of gain. Only in the 
exceptional cases where expenses of production are the same 
for all the units of supply, and where the demand represents 
consumers of identical requirements and means of purchase, 
can it be said that such bargaining achieves full equality of 
distribution of the gain. 

§ 3. Another way of envisaging the process is to consider 
a market in relation to the real costs and utilities represented 
in the different units of supply. By real costs we signify, 
either, the disagreeability of giving out productive effort un¬ 
der the actual conditions of the processes employed, the en¬ 
forced attendance in a noisy workplace for fixed times for 
the performance of some monotonous, uninteresting, and tir¬ 
ing task, or the actual human damage to mind or body in¬ 
volved in the performance of such work. By real utility we 
signify, either the conscious enjoyment obtained by the con¬ 
sumption of the goods, if they are consumers’ goods, or the 
actual human gain from their consumption. 1 Whether we 
reckon costs and utilities in terms of current feelings or of 
human values, the argument here runs on similar lines. 
Every unit of the supply in a market has the same value or 
price attached to it, with the implication that it carries the 
same cost and utility, whereas in fact a different cost and a 
different utility attaches to each unit. Since the last in¬ 
crement of a supply may be deemed to be produced by the 
last hour’s work, its real cost, in human valuation at any 
rate, if not in current disagreeability, will be greater than 
that of any of the earlier increments, while the real utility 

1 Where productive goods are concerned, their real utility must be 
accredited to the consumptive goods for which productive goods are 
either materials or instruments. 


ETHICS OF BARGAINING 


207 


of its consumption, similarly estimated, will be smaller. 
Though the time-curves of a working day will not show a 
quite regular fall in cost and rise in utility from start to 
finish, 1 the units of supply contributed by the earlier hours’ 
work will be much lighter in real costs (on either reckoning) 
than the contribution of the later hours, while these earlier 
units of supply, going to meet the more urgent needs of con¬ 
sumers, will carry a higher real utility. 

This, it may be urged, is the operation of a natural econ¬ 
omy which carries no element of injustice or of inhumanity. 
If a worker gets the same wage for his last hour’s work as for 
his first, his last hour’s pay must be deemed to carry a utility 
of consumptive satisfaction at least enough to compensate 
the disutility of the last hour’s work, and each earlier hour’s 
pay will carry an enlarging surplus of utility. So, like every 
other marketeer, buying or selling his stock of goods at a 
single market price, he gets a differential gain from each unit 
of his buying or selling, except the ‘marginal’ unit. 

§ 4. Now how far, and under what circumstances, is this 
analysis valid? It certainly holds of a Crusoe economy. 
Crusoe would not spend an hour’s more work on any job 
than its estimated yield in utility, as compared with the 
utility or enjoyment which the allotment of this hour to an¬ 
other job, or to leisure, would secure. Every successive 
hour’s work for him would yield a different surplus of utility 
over cost, whether reckoned in current satisfaction or in hu¬ 
man utility. The same economy would obviously hold for a 
communist society, assuming it were honestly and intelli¬ 
gently run. The community would be simply an enlarged 
Crusoe, laying out the productive energies of its members as 
Crusoe would lay out his several skills and hours. A per- 

l According to modern psychological tests, the time-curve of con¬ 
scious fatigue and of risk in most routine occupations has fluctuations. 
The first hour’s work is not felt as the easiest, nor the last hour’s work 
always as most difficult and tiring. The true human costs, however, 
will not follow these fluctuations. 


208 


ETHICS OF BARGAINING 


feet individualism or anarchism on the lines of William 
Morris’s ‘News from Nowhere’, or even according to the less 
idealistic conditions envisaged by some laissez faire econo¬ 
mists, would conform to the same pattern, provided certain 
conditions of liberty and equality prevailed. If capital and 
labour had perfect fluidity and divisibility and could apply 
their productive services in contracts of sale on terms of 
equality with all possible vendors, and if all natural resources 
were equally available for all, an equitable distribution of 
real costs and utilities would seem to emerge. 1 

But in the actual economic system none of these essential 
conditions is found. The labour or capital affixed to cer¬ 
tain occupations and places is not free to transfer itself to 
others, save at a heavy loss. New labour and capital are 
only free within certain limits to enter the productive proc¬ 
esses. Most new labour is restricted in its choice and flow 
by lack of opportunities for training and information, and 
by ties of family and local attachments and other factors of 
human personality. But there are two conditions of labour 
which completely vitiate the assumptions of the perfect indi¬ 
vidualism. One is the fact that most workers are usually 
destitute of any other means of livelihood for themselves 
and their families than the continuous sale of their perishable 
labour-power. Their labour sale is always conducted under 
the disabilities of a forced sale. Except for repellent, precari¬ 
ous, and inadequate aids from public and private charity, the 
worker must sell his labour-power continuously to an em¬ 
ployer who is not under a similarly urgent compulsion to buy 
it. It is true that invested capital loses if it does not continu¬ 
ously purchase labour for its business uses. But the balance 
of injury upon the two sides of the labour sale is very unequal. 
The worker’s life depends upon selling his labour-power, the 

iThis judgment, however, rests on the assumption that equity is 
satisfied by payment according to productivity, not according to effort 
or needs. 


ETHICS OF BARGAINING 


209 


capitalist-employer’s life does not. The perishability of 
labour-power, therefore, must be a normally injurious factor 
in the labour-contract. No public or private provisions for 
unemployment, no collective bargaining, and no competi¬ 
tion among employers can adequately offset this normal 
weighting of the labour-bargain in favour of the buyer. 

The other disabling element in the sale of labour-power is 
that it is not detachable in the conditions of its delivery from 
other human factors of personality. In this particular sale, 
as in no other, vital non-economic considerations enter. 
Labour is treated as a commodity, the sale of which shall 
conform to the laws of a market. But the whole body and 
soul of the worker are implicated in the conditions of the 
delivery of The goods’. When labour is bought, the continu¬ 
ous presence of the labourer at the workplace is involved; 
and, for the human costs of this continuous presence, with its 
physical and moral risks and dangers, the labour contract 
makes no reliable provision. It is true that in Britain, and in 
some other countries, a legal responsibility for compensation 
is imposed upon employers in respect of certain injuries of 
health or limbs directly traceable to working conditions. It 
is, however, evident that many occupations involve heavy 
normal risks to health, and even life, for which no monetary 
compensation is made, and for which no monetary compensa¬ 
tion would be adequate. Indeed, most of these risks do not 
figure in the wage-contract. There is no ground for holding 
that the risks of phthisis from factory dust, or potter’s jaw, 
or chronic rheumatism from exposure to wet, cause higher 
wages to be paid in employments subject to these conditions. 
Some occupations notoriously brutalize the personality of 
the worker, by sheer physical exhaustion, or by a mechanical 
monotony of routine that evokes recourse to the lowest and 
most degrading forms of sensational stimulants. Others, 
as for instance many of those engaged in the production of 
luxurious goods and personal services, carry heavy moral 


210 


ETHICS OF BARGAINING 


costs in the sense of their essential disutility or futility. Such 
damages, physical, intellectual, and moral, are not paid for 
in the price of the labour that involves them: they are 
Thrown in’. Some of these occupations, indeed, are so nox¬ 
ious to self-respect in Tree’ communities that they either tend 
to disappear, or to be foisted upon more servile newcomers 
from outside. Such is in general the situation of domestic 
service in America. But though the growing scarcity of such 
labour, in societies where personality acquires a conscious 
value, affects the labour contract in raising wages, these 
higher rates of pay cannot be regarded as a true measure of 
the human costs which they may reasonably be supposed to 
compensate. 

These considerations affecting the wage-bargain all run 
back to the fact that in such bargains non-economic factors 
are involved which cannot properly be taken into account in 
the terms of the bargain. It is, perhaps, the heaviest ethi¬ 
cal indictment of the economic system that in its operation it 
is bound to assume (a false assumption )that man is a purely 
economic being, and to ignore all or nearly all of the other 
human processes and values that are involved in the eco¬ 
nomic life. 

§ 5. But let us now return to the starting point of our 
analysis, the case of the bargain of a starving man with a sin¬ 
gle vendor of food. We saw that here the maximum advan¬ 
tage lay with the seller, by reason of the vital urgency of the 
needs of the buyer. Now the other situations we have en¬ 
visaged are all modifications of this extremity. The ultimate 
weakness of the wage-earner, bargaining either singly or in 
groups, is that in the last resort his food supply would disap¬ 
pear before that of his employer. Wherever there is inequal¬ 
ity of monetary resources in the parties to a bargain, some 
measure of this economic force weights the scales. A poor man 
cannot bargain with a rich man on equal terms, either for the 
sale of his labour or for the purchase of the commodities 


ETHICS OF BARGAINING 


211 


he buys with his wages. The town worker pays higher rent 
for his housing than does the man of means. His food and 
fuel, necessarily bought in small quantities, are dearer when 
quality is taken account of. The worker, therefore, is a 
weak bargainer both as producer and as consumer. So, also, 
the small business man, as farmer, manufacturer, or trader, 
in his relation to wealthier businesses from which he buys or 
to which he sells. His narrow resources and limited credit, 
apart from their effect in impairing his technique and so rais¬ 
ing his overhead costs per unit of output, disable him in his 
marketing at both ends, in buying his materials, plant, build¬ 
ings, etc., and in selling to businesses whose superior finances 
make it less urgent for them to buy from him than for him 
to sell to them. Apart from this general situation, the small 
business is commonly either ‘tied’, or restricted in its area of 
purchase or of sale. The farmer must sell to some big owner 
of elevators or stockyards, or some ring of dealers, while in 
buying his machinery, fertilizers, etc., he is in the hands of 
the local bank or the agent of some big combine. The fish¬ 
erman, the fruit-grower, or dairyman, is in the same situation, 
aggravated by the perishability of his goods. Everywhere 
the large strong business is better able to combine with other 
strong businesses for advantageous terms in buying and in 
selling. Whenever such big businesses or combines deem it 
expedient, they are able to buy out small competitors upon 
their own terms, using their greater finances to undersell the 
latter in the market. 

§ 6. These familiar instances should suffice to illustrate 
the general rule that, even where competition survives in the 
business world, it is seldom ‘free’, and does not work out 
equally, or equitably, in any class of bargaining between the 
financially strong and well-organized bargainer and the fin¬ 
ancially weak or worse-organized. Save in the rare case 
when both parties are equally strong in finance, knowledge, 
and organization, business bargains distribute the gain un- 


212 


ETHICS OF BARGAINING 


equally and proportionately to an economic force which, in 
its final issue, means the power to ‘starve the other out’. 

The prima facie equity of free competition and laissez 
faire as a security for the fair apportionment of wealth is 
thus dismissed upon the ground that there is no freedom of 
competition, or of bargain, between financial unequals, and 
that in almost every actual instance bargaining takes place 
between unequals. It is sometimes maintained that, though 
the gain in any particular bargain is liable to be unequally 
distributed, the advantage in one bargain will be compen¬ 
sated by the disadvantage in another, and that in the long 
run the bargaining process works out with substantial justice. 
Nobody is always buying necessaries of life from monopo¬ 
lists. Even the poor man in most of his dealings as buyer 
is able to buy at fair competitive prices, and though rings of 
dealers may fix prices for his food and fuel, they only exer¬ 
cise a limited power of exploitation in view of ‘the elasticity 
of demand’ and ‘the law of substitution’. But such con¬ 
siderations are only extenuating circumstances. Poverty 
is at a normal disadvantage in bargaining with wealth. Not 
only a monopoly, but any natural or contrived scarcity, en¬ 
dows its owner with a normal advantage in all these dealings. 

It is in these processes of unequal bargaining at innumer¬ 
able points in the economic system that the bits of unearned 
excessive gains emerge which, in our earlier and more gen¬ 
eral survey, form the rents, high dividends, profits, fees, 
and salaries, that we distinguish as ‘surplus’ in contradistinc¬ 
tion from the necessary, useful payments called ‘costs’. The 
acknowledged difficulty of measuring these surpluses in all 
cases, or of distinguishing them from legitimate rewards or 
incentives of initiative, enterprise, and personal efficiency, 
does not impair either the theoretical validity of the distinc¬ 
tion, or its practical importance in all thoughtful proposals 
for making the economic system more equitable and more 
productive of human values. Only by close analysis ap- 


ETHICS OF BARGAINING 


213 


plied to this distinction between costs and surplus can we 
safely steer between the moral and economic dangers of 
checking or stifling those factors of individual character and 
capacity in the business world whose free expressions are es¬ 
sential alike to economic progress and to moral personality, 
on the one hand, and the waste, unfairness, and inhumanity 
which are the sources of our present discontents, on the other 
hand. 

In conclusion there is one aspect of the bargaining process 
which has always evoked the criticisms of moralists who seek 
to establish in all human institutions the education of a truly 
social personality, and of a sound community in which such 
social personalities may live and thrive. By their very 
nature the bargaining processes inhibit the consideration of 
the good of others, and concentrate the mind and will of each 
party upon the bargaining for his own immediate and mater¬ 
ial gains. Each for his own selfish ends consciously mobi¬ 
lises all his economic forces. Within the legal limits of the 
struggle he is out to get as much and give as little as he can. 
Though he may have no clear consciousness of any moral 
degradation in such conduct, and may even justify it as a 
process fraught with social gain in some long run, this con¬ 
stant drive of selfish interest involves a hardening of the 
moral arteries. Equity and kindness, considerateness, must 
be the constant food of a fine personality, and an economic 
system which not merely fails to supply such food, but feeds 
and stimulates the purely selfish instincts and desires, is hos¬ 
tile to human character and progress. The mechanism of 
markets works by a conflict of forces: it is not an equitable 
instrument of cooperation for the economic welfare of the 
community. 








PART IV 


ORGANIC REFORMS OF THE 
ECONOMIC SYSTEM 



CHAPTER I 


THE PRINCIPLE OF EQUITABLE 
DISTRIBUTION 

§ 1. Our general survey of the economic system from the 
standpoint of ethics discloses great defects, alike in the con¬ 
ditions under which wealth is produced.and distributed, and 
in the processes of economic valuation. So far as free com¬ 
petition and free bargaining prevail, their bracing effects on 
individual industry, enterprise, and other factors of economic 
efficiency are accompanied by a stimulation of the selfish and 
combative instincts that is hostile to the education of a social 
personality and a strong community. Nor does combina¬ 
tion, displacing competition among the members of particu¬ 
lar trades, improve the moral situation. As we have shown, 
it serves to sharpen conflicts between stronger and weaker 
trades or groups of trades, and enhances the inequality of 
bargaining between producer and consumer by endowing 
trade combinations with increased powers to dictate prices. 
The entire process of bargaining, by which the apportion¬ 
ment of work and of its product is determined, is seen to con¬ 
sist in a struggle where economic strength, not justice or 
humanity, is the decisive factor. The fiction of the so- 
called ‘natural harmony’, once supposed to reconcile the 
opposed interests, has been exposed, and, though we have 
recognised some community of interest in the working of the 
economic system as a whole, this economic good is much 
diminished by waste and friction owing to the lack of any 
common purpose. The waste is much larger than it appears, 
217 


218 


EQUITABLE DISTRIBUTION 


for much of it consists in setting productive energies and re¬ 
sources to produce wealth, which either in its intrinsic nature 
is fillth’, or, from the inequality of its distribution, shrivels 
in the utility or enjoyment that it furnishes. 

All through the ages idealistic reformers have bewailed 
these faults, and have presented schemes of economic society 
in which they should be remedied. These utopias have 
always been wrecked upon the rocks of a human nature, en¬ 
visaged as essentially immutable, or, at any rate, unadapt¬ 
able to utopian requirements. The validity of modern 
socialistic and communistic principles and schemes turns 
upon the same critical consideration, the nature and amount 
of the adaptability of human nature. 

§ 2. From the standpoint of the abstractly desirable, and 
one might add the abstractly reasonable, complete schemes 
of economic socialism, or communism, are morally attractive. 
Here is a representative definition of socialism from an au¬ 
thoritative economic source. 

“Socialism requires that the processes of production and 
distribution should be regulated, not by competition with 
self-interest for its moving principle, but by society as a 
whole, for the good of society.” 1 

What could be more desirable then than that the economic 
system should be organised consciously for the good of its 
members as a whole? A single social will and purpose, to 
displace the tangle of conflicting private wills and purposes 
which at present govern industry, so far as it is governed! 
But what are the necessary implications of such a conscious 
social organization? Evidently certain present personal lib¬ 
erties must be curtailed. No man will be free to choose his 
own occupation and economic status, or to take out of the 
pool of wealth more than his share as fixed by the economic 
government. By most men, no doubt, these interferences 
with personal liberty will not be regarded as substantial. 

1 Palgrave, Dictionary of Political Economy, ‘Socialism’. 


EQUITABLE DISTRIBUTION 


219 


Indeed, it might be contended that their real liberties would 
be enhanced. For whereas now they have meagre oppor¬ 
tunities of ascertaining what they can best do, it would be 
to the interest of organized society to discover it, and so to 
enable them to fill their ‘proper’ place. And as for the 
liberty to fix their own pay, few possess this power in any ap¬ 
preciable degree. They would stand rather to gain than to 
lose by a transfer of material and moral compulsion from a 
private capitalism to an organized society in which all mem¬ 
bers might have an equal voice. No doubt a good deal 
would depend upon how this organized economic community 
was governed. The economic government need not be close¬ 
ly identified with the political state. The trend of most 
modern socialistic aspiration is against State socialism, in 
the sense of a central political bureaucracy. But a single 
authority there must be, with a sufficiency of moral or ma¬ 
terial compulsion at its command. It must have some 
powers derived from the political state, and as we shall read¬ 
ily recognise, the financial requirements of the State would 
preclude complete economic autonomy. 

Regarded from the ethical standpoint, the critical test of 
any large conscious socialist experiment is the adequacy of 
moral compulsion, that is to say, of the motives or incentives 
operating on the members of the economic society. If it 
be possible to get all, or nearly all, the members of a society 
to do their proper share in productive work, and to take 
their proper share from the general pool, because this way 
appeals to them as fair and agreeable, then the conditions, 
not merely of socialism, but of full communism, would exist. 
We should then have the Kingdom of Heaven upon earth! 
The horror which attaches to the term and concept ‘com¬ 
munism’ in most well-ordered minds, is an interesting psy¬ 
chological study. In part, no doubt, it is explained by the 
physical violence which has accompanied the historical ex¬ 
pression and repression of this revolutionary doctrine. But 


220 EQUITABLE DISTRIBUTION 

at the back of this feeling, and screened by it, sits the desire 
to disbelieve in the equity or the practicability of a way of 
life so disturbing to established institutions, and in particu¬ 
lar to private property. There is even a revulsion against 
the ideal of economic equality and the uniformity of life 
which communism suggests. Yet the ethics of communism, 
as expressed in the Saint-Simonian maxim, ‘From each ac¬ 
cording to his powers, to each according to his needs’, would 
seem to express the highest aspirations of justice and human¬ 
ity. It is the accepted ethics of that simplest human group, 
the family. Where families are virtually self-supporting 
economic units under the conditions of isolated settlements, 
this communist rule everywhere prevails. Personal pro¬ 
perty is confined to articles in actual use, and, by some 
paternal authority or by mutual consent each does his best in 
the upkeep of the family, and satisfies his needs out of the 
common stock. Any shirking on the one hand, or ‘hogging’ 
on the other, is resented and repressed by the censure of this 
little society. There are, no doubt, departures from this 
sound economic rule, the greed of ‘the old man’ in the primi¬ 
tive family, or some element of favouritism. But in the 
‘best families’, where members are attached by ties of cus¬ 
tomary cooperation and affection, practical communism pre¬ 
vails and is accepted as ‘right’. Nor is the rule confined to 
primitive conditions, or isolated families. In any factory 
town of Lancashire or Massachusetts, large numbers of fami¬ 
lies with several grown-up wage-earners, father, mother, 
sons, and daughters, conduct a limited communist economy, 
paying into the family purse a proportion of their earnings, 
and taking out what satisfies their several needs. 

§ 3. Nor is this communism always confined within the 
family. Apart from the often-cited instances of a modified 
tribal communism in backward tribes, whose livelihood is 
got from hunting, fishing, looting, or common cultivation of 
the soil, the natural validity of communism as a social princi- 


EQUITABLE DISTRIBUTION 


221 


pie comes out in every sort of emergency where close coopera¬ 
tion on these lines is an evident condition of survival. It is 
practised by shipwrecked people in a boat, or on an uninhab¬ 
ited island, or in a besieged town with straitened supplies. 
But the most remarkable testimony is furnished by a nation 
at war when driven to extremities. Though vitiated by 
many defects of operation, every belligerent European 
country in the Great War moved, under the pressure of eco¬ 
nomic emergency, more and more along the road to com¬ 
munism, claiming that every man should do ‘his bit , J and 
should take the ‘rations’ allotted to him in proportion to the 
needs of himself and his dependents. France, since the war, 
has formally proclaimed war-communism, by a law placing 
all civilian persons and property at the disposal of the State 
in the event of another war. Indeed, the conditions of 
modern warfare compel the adoption of such an economy as 
a condition of survival. 

It is not surprising that this emergency economy should 
have acted as an advertisement of communist doctrine. 
The struggle for a safer and a better life is the chronic situa¬ 
tion for the majority of the peoples in most countries. It is a 
continuous emergency. Why should not the principle and 
practice, held to be equitable and practicable for war-time, 
be applied to peace-time? The familiar answer is that the 
emergency of war arouses in the members of a nation a 
sense of solidarity which makes them willing to undergo per¬ 
sonal sacrifices and an authoritative discipline which they 
would reject as a normal regimen. In ordinary times this 
willing submission to a single social will simply is not there. 
A formal, or even an operative, socialism or communism 
may, indeed, as we are aware from recent experiences in 
Russia and Italy, be imposed by a ‘conscious minority’ or a 
‘dictator’, with a tacit or even a willing assent of the major¬ 
ity. A people may thus submit, for a time at any rate, to 
serve the State, or Government, or its magnetic chief, from 


222 EQUITABLE DISTRIBUTION 

some mixed motives of fear, admiration, and herd-feeling. 
But it is difficult to conceive a durable communism without 
a general consent of a more positive order. There is a 
world of difference between assent and consent. The former 
implies a submission, the latter an expression of personality. 
A morally sound communism, indeed any securely practi¬ 
cable communism, implies a conscious and continuous desire 
for the good of the community far stronger than appears to 
exist in any civilized people. In fact, the general trend of 
civilization has been, according to the accepted interpreta¬ 
tion, a growth in private personality, and a decline of im¬ 
posed or accepted social regulation. Even if, as we have 
argued, this antithesis is not ultimately sound, because in 
civilisation the individual person becomes more social in 
his ways of life, the prominence of the distinctively self- 
regarding feelings seems to prohibit the sort of self-surrender 
demanded for effective communism. In the Western world, 
at any rate, the sense of personal dignity, the standing up 
for one’s own rights, the pride in making one’s own way in 
the world, the sporting and adventuring spirit that craves 
risks and conflicts, are regarded as most highly valued in¬ 
gredients in a personality. Man is, indeed, a social animal 
in the sense that he likes to work and live with others, and 
that their good, individual arid collective, has some appeal for 
him. His group, his nation, the race, even humanity, have 
some moral value for him, declining in significance as the 
circles widen. But his own regard for his private interests 
and satisfactions is generally paramount. His actual men¬ 
tality is exceedingly remote from the communistic require¬ 
ments. 

“The new society will come ‘when people have become 
accustomed to observe the fundamental facts of social life, 
and their labour is so productive that they will willingly 
work according to their abilities . . . ’ There will then be 
no need for any exact calculation by society of the quantity 


EQUITABLE DISTRIBUTION 


223 


of products to be distributed to each by its members: each 
will take freely ‘according to his needs’.” 1 The forcible 
domination of a small ‘conscious minority’ in Russia, repress¬ 
ing all opposition and all criticism, is defended as necessary 
to “accustom” people “to observe the fundamental facts of 
social life.” The bad education and traditions of the past 
have moulded a ‘human nature’ which, as regards its social 
feelings and attitudes, is unfitted for immediate and whole¬ 
hearted and clear-minded acceptance of the new order. A 
steady experience of that order, in an atmosphere where no 
opposition or criticism can confuse the mind or breed con¬ 
flicts of feeling, will soon produce the needed changes of 
‘human nature’ that will cause the ordinary man and woman 
to give to communism a real consent of intellect and heart. 
Such is the contention. 

The difficulties of accepting it are many. The first and 
foremost is the difficulty in accepting the self-assurance of 
any dominant minority that their interpretation of human 
nature and its adaptiveness to communistic life is sound. 
Another closely related difficulty arises from the testimony 
of history to the tendency of tyrants everywhere to mask 
their greed for personal power under some specious pretense 
of public service. It belongs to the developed intellectual- 
ism of modern times to weave a whole ‘philosophy’ as a sup¬ 
port for this performance. Where both this philosophy, 
and the experiment that it is invoked to bless, are forcibly 
protected against all questioning, this denial for the future 
of that free-thought from which this very doctrine and policy 
claim to have emerged victorious, cannot be expected to win 
the acceptance of those who continue to believe in the vital 
values of continuous truth-seeking. In a word, the notion 
of a complete revelation of a society, so revolutionary in de¬ 
sign, so violent in its attempted realisation, so indiscriminate 
in its application to the diverse patterns of the web of social 
1 Lenin, quoted Laski, Communism, p. 163. 


224 


EQUITABLE DISTRIBUTION 


life, can only seem acceptable, either as a counsel of despair 
to minds maddened by the disorders and miseries of their 
immediate surroundings, or as a beautiful dream of social 
solidarity to a few selfless idealists, or as a cunning design for 
the attainment and exercise of power to insincere or self- 
deceiving politicians. 

§4. The ethical ideal is a sublime one. If, on such a 
basis, society could get all its work done with skill and 
energy, if the best powers of invention, initiation, and en¬ 
terprise were placed at its disposal for the improvement of 
the arts of industry, if industrial energy and capital could be 
directed in due proportion along the various channels, while 
a proper control of population throughout the entire eco¬ 
nomic world could hold in check the operation of the law 
of diminishing returns, every dictate of reason, justice, and 
humanity would seem to favour such a system of society. 

It may even be admitted that the ambition and the 
greed for power in the advocates and executants of com¬ 
munism are not fatal to its claims. A man may easily com¬ 
bine genuine philanthropy, or a sincere regard for public 
welfare, with a craving for personal distinction and the 
exercise of personal power. The crucial test is the ability 
of communism to evoke and maintain all the necessary eco¬ 
nomic incentives. This is a problem of practical psychology. 
In the application of such a test we need not assume, with the 
cruder popular exponents of the classical economics, that 
man is always as lazy and as greedy as he dare, that he works 
exclusively for personal gain, and that, therefore, all curbs 
upon profiteering must react disastrously on industrial 
efficiency. On the contrary, it may, and must, be admitted 
that man is naturally active, that he likes to discover and 
apply power of body and mind to constructive work, arrang¬ 
ing his natural environment, partly for the sheer pleasure 
of doing things, partly for the satisfaction of enjoying what 
he has done or made. Nor does he work only to serve his 


EQUITABLE DISTRIBUTION 225 

own ends. He will often put himself to considerable 
trouble to do things for other people, taking his compensa¬ 
tion from the pleasure he has in being helpful. Within 
limits he is altruistic or social, and, even when he is actuated 
primarily by his own interests, will like to recognise that the 
work he chooses to do has social value. 

So, while seeking gain, he is not insistent on taking all 
the gain he can, unless he is a merchant whose chief or sole 
concern is with prices, and even as a merchant he will have 
his scruples. There are many other incentives to economic 
activity besides profit or pay. Satisfaction in doing a job 
thoroughly and well, pride of achievement, honour, sense 
of power, duty to society, these and other motives enter into 
the economic life. But, it will be urged, granted these other 
motives are operative in certain higher types of work, most 
hard useful work, done for any length of time is so devoid 
of intrinsic interests, so disagreeable, that the ordinary man 
under normal conditions will only perform it under the ur¬ 
gent need of a pecuniary reward. Much of this hard dis¬ 
agreeable work is essential to civilisation, has a high social 
value, but is it practicable to make this sense of social value 
an operative motive in the worker’s mind, displacing or sub¬ 
ordinating his present sense of personal gain? Can it be 
expected that uneducated labour has to any appreciable ex¬ 
tent a sense of social value? To most intellectuals the image 
of themselves as performing such manual labour is so 
repellent that they cannot conceive anybody undertaking it 
except under the urge of sheer economic compulsion. Nor 
can they impute to the separate human cogs in the elaborate 
economic machine any consciousness of, or interest in, the 
human services it renders. But against this view let me cite 
a more liberal interpretation of the worker’s attitude. 

“The worker’s point of view implies the recognition of the social 
necessity of the work he does. He feels himself a man in his work, 
not merely in his own body, but in the effects of his work on other 


226 


EQUITABLE DISTRIBUTION 


men. This is no theoretical economics or hypothesis that labour 
is the sole source of wealth; it is the simple observation of the de¬ 
pendence of men in society upon the work done for the upkeep of 
society. Perhaps there are some leisured and cultured persons 
in our ‘select’ residential districts, who inhabit what is called either 
bijou or baronial, who really think that the engine-driver or the 
dustman does his work without thinking about it. Descartes, 
that very select philosopher, thought birds were automata; and 
those who get their ideas and emotions from a lending library seem 
to imagine that manual workers are automata. But speak to 
dustmen, or railway guards, or coal miners, and you will find 
the sense of the social value of work done very widely appreciated 
by them. It is almost a physical sense of the unity of the acts 
which go to make up civilisation.” 1 

But neither Mr. Burns, nor any other exponent of the 
workers’ point of view, would maintain that this “sense of 
the social value of work” would go far as an actual incentive 
to its due performance, unless the worker were liberated from 
the insecurity and other cramping conditions under which he 
usually works. Nor can it be denied that the monotony of 
dull, highly subdivided labour, especially when machinery 
sets the pace and rhythm, does tend to impose a measure of 
automatism upon the worker, and to keep on a low level 
what sense or feeling he can be said to have for the social 
utility of his work, and its place in the organic unity of the 
economic system. 

It may also reasonably be claimed that the growing re¬ 
luctance of workers to give out their best energy for the 
profit of employers and shareholders implies some sense of 
the wider social significance of their labour. But while re¬ 
sentment against profiteering might be relieved by the 
conversion of a private into a public undertaking, experience 
does not indicate that the sense of being a public servant 
creates a live interest in the efficient performance of work 
which in its nature is dull, toilsome, and uninteresting. The 
‘public’ and ‘the government’ are not objects of affection 
1 C. Delisle Bums, The Philosophy of Labour, p. 36. 


EQUITABLE DISTRIBUTION 


227 


whose ‘good’ has a keen appeal. The government stroke’ is 
generally held to be somewhat slower and slacker than the 
stroke of private enterprise. This may, of course, be ex¬ 
plained as a legitimate and wholesome reaction against the 
excessive drive of managers and foremen bent on grinding 
out profits for shareholders. The slower government stroke 
may make for human welfare. But upon the whole, it is not 
safe to assume that the private personal incentive of gain can 
readily be displaced by any other complex of personal and 
social motives in the current economic system. 

§ 5. This judgment, however, may be held to assume too 
static a view both of human nature and the economic system 
as a whole. Alter the structure of economic institutions, as 
expressions of human relations, while preserving and improv¬ 
ing their material technique, and you may get important 
changes in economic incentives. Such proposals do not 
imply a belief in any miraculous transformation of human 
nature regarded as an organic complex of inherited physical 
and psychical capacities, but rather a belief in the possibility 
of such changes in the economic appeal as will bring into 
fuller play some of these capacities and give diminished im¬ 
portance to others. Economists have sometimes recognised 
this possibility. “It is true that human nature can be modi¬ 
fied: new ideals, new opportunities, and new methods of ac¬ 
tion, may, as history shows, alter it very much in a few gen¬ 
erations: and this change in human nature has perhaps never 
covered so wide an area and moved so fast as in the present 
generation. But still it is a growth, and therefore gradual; 
and changes of our social organisation must wait on it and 
therefore they must be gradual too. But though they wait 
on it, they may always keep a little in advance of it, pro¬ 
moting the growth of our higher social nature by giving it 
some new and higher work to do, some practical ideal towards 
which to strive.” 1 

1 Alfred Marshall, Principles of Economics, p. 49. 


228 


EQUITABLE DISTRIBUTION 


But what should be that “practical ideal”, and how far 
should it be set towards the achievement ultimately of the 
communist ideal, “From each according to his powers, to 
each according to his needs”? 

Before adopting this final criterion, it will be well to 
explore a little closer its chief implications and in particular 
to consider its relations to what is termed a Functional 
Society. The contrast between an economic society op¬ 
erated by the acquisitive urge of its individual members, 
and one operated by a sense of the obligation to perform a 
social service is a modern presentation of the ethics of in¬ 
dustry in conformity with the organic conception of society. 
Mr. Tawney thus defines the Functional Society. “A 
society which aimed at making the acquisition of wealth 
contingent upon the discharge of social obligations, which 
sought to proportion remuneration to service and denied it 
to those by whom no services were performed, which en¬ 
quired first, not what men possess, but what they can make, 
or create, or achieve, might be called a Functional Society, 
because in such a society the main subject of social emphasis 
would be the performance of functions.” 1 Now so far as 
relates to the productive processes, the functional view is in 
close agreement with the communist formula. Every man 
should be set to do that work which makes his best con¬ 
tribution to the requirements of society, and to do it as 
efficiently as possible. His job will be determined not pri¬ 
marily by his own preference, but by the relative social 
importance of his several capacities. From each according 
to his capacity for serving society. But when we take the 
other aspect of functionalism, the proportioning of remunera¬ 
tion to services, some divergence in the two formulas appears. 
‘According to service’ is not obviously identical with ‘accord¬ 
ing to needs.’ The service test would seem to demand a 
distribution of the whole produce or income of the society 
1: R. H. Tawney, The Acquisitive Society, p. 29. 


EQUITABLE DISTRIBUTION 


229 


in proportion to the value of the services rendered, or of 
the function performed. But the difficulty arises that in an 
organic conception of society there is no clear criterion for 
assessing the respective value, importance, or utility of the 
several functions. 

It may, however, be held that ‘remuneration, according to 
service’ signifies a true subsistence or efficiency wage, one 
which suffices to make each worker do his particular work 
for society in the best way. But even so, this rule does not 
cover the whole problem of distribution in a society where 
cooperative economy produces, or is capable of producing, 
more than enough to make these subsistence payments. If 
it be urged that any such surplus should also be distributed 
on a functional basis in such wise as to improve the efficiency 
of the various orders of producers, and to improve the capi¬ 
tal structure of the industries (with due regard to any eco¬ 
nomic functions performed by governments with revenue 
derived from taxes), such a view seems to envisage the 
economic problem as concerned only with the promotion of 
economic productivity and not with the furtherance of 
human welfare, save so far that welfare is dependent upon 
productivity. Now this is manifestly not the conclusion in¬ 
tended by Mr. Tawney to flow from the application of the 
functional conception. A ‘functional society’ cannot be 
contained within the limits of economic activities: the 
economic activites will be inextricably bound up with other 
non-economic activities contributing to the full functioning 
of the organic life of individuals in a society. 

Now as we perceive, alike in the performance of economic 
processes of production and of consumption, other functions 
of human life are affected, and our human valuation requires 
that, both in allotting work and in distributing the product, 
these influences upon non-economic interests and values be 
taken into account. Therefore, a well-ordered functional 
society, in allotting the several tasks to its members, would 


230 


EQUITABLE DISTRIBUTION 


have regard, not only to the consumptive requirements of 
society and the specific abilities of its members to make their 
contributions, but also to the reactions which these several 
contributions will have upon the general well-being of the 
performers. A human, as distinct from an economic, inter¬ 
pretation of ‘from each according to his powers’ will insist 
upon interpreting ‘powers’ or ‘abilities’ in such wise as to 
take account of any non-economic injuries or gains result¬ 
ant on the performance of an economic function. Still 
more exigent is the demand for a liberal interpretation of ‘to 
each according to his needs’, in conformity with the con¬ 
ception of an organic society. “The ideal distribution,” 
says Dr. Hugh Dalton, “would rather be a distribution 
according to the capacity of individuals, or families, to 
make a good use of income.” 1 Nor is ‘a good use’ confined, 
as the older economists would have it, to the productive 
services it enabled the recipient to render, or, even in our 
human interpretation of economic processes, to its favour¬ 
able reactions upon total costs of production and utilities of 
consumption. Wealth, the product of work, should be dis¬ 
tributed according to the support it renders to the whole life 
of the recipients. It should give to each what each is 
capable of utilising for a full human life. Capacity of use 
or enjoyment, not ‘needs’ in its narrow significance of physi¬ 
cal or even spiritual necessities of life, must be our humanist 
interpretation of the formula. It must cover three catego¬ 
ries of payments, first, that required to maintain a member of 
society in the performance of his special economic function; 
secondly, a full, human maintenance fund for a member 
of a civilised society; and thirdly, an adequate economic 
provision for such education, travel, social intercourse, or 
other opportunities of personal development and human 
enjoyment as may raise his human value for himself and for 
society. 


1 Inequality of Income, p. 10. 


EQUITABLE DISTRIBUTION 


231 


In other words, if we adopt the ‘needs’ basis of distribution, 
as we do, it is because this is the shortest convenient formula 
for equitable distribution in accordance with capacity for the 
personal and social utilisation of income. 

§ 6. Now, taking this statement of what we may term a 
practical ideal, what are the changes in economic organisa¬ 
tion and in the mental attitude of members of economic 
society, which may contribute towards its realisation? The 
moral atomism of the economic system, the absorption of 
each member in private gain-seeking, must evidently be the 
first object of attack. Such a distribution would secure, in 
principle, that the real income of a community was consumed 
in such a way as to yield the largest sum of human welfare, 
measured by any accepted criterion of a desirable life. But 
though this principle may be morally attractive, we have 
to ask how far it is capable of application. To some extent 
we can estimate the different needs of men for efficient per¬ 
formance of their economic work: there is some ascertainable 
relation between the intake of food and the output of physi¬ 
cal energy in productive labour. We may even carry this 
natural adjustment of consumptive to productive efficiency 
a little further, recognising that certain material comforts 
and conveniences, such as house accommodation adequate 
to privacy, the liberty of movement afforded by a motor 
car, the ownership of books, etc., may be real contributions 
to economic efficiency for many types of worker. But when 
we rise above a true subsistence level we find it more and 
more difficult to compute the economic advantages of fur¬ 
ther payments. And when we treat payment according to 
needs from the standpoint of what is ‘needed’ not merely 
to support economic efficiency, but human efficiency in its 
broader meaning, we seem soon to pass the limits of the 
practicable. 

Indeed, two objections to ‘the needs formula’ are raised 
by Professor Laski; one based on the impossibility of dis- 


232 


EQUITABLE DISTRIBUTION 


criminating between the capacities of different men for 
using or enjoying wealth, the other upon the deficiency of 
the aggregate income of a community for satisfying the 
full and ever-growing ‘needs’ of its members. Mr. Laski 
therefore holds, “Needs can only mean average needs. We 
have to assume some means of citizenship and make our 
principle of reward hinge upon that mean. We must there¬ 
fore fix our standard remuneration at a level which does not 
take account of individual idiosyncrasy. Any principle 
of reward must satisfy the two complex conditions, that 
it enables the individual to reach out towards his best self, 
while, simultaneously, it preserves and develops the neces¬ 
sary functions of society.” 1 

Now, in order to realise this economy, we must supplant 
the concept of direct individual income by that of participa¬ 
tion in communal income. Though I do not think our princi¬ 
ple ties us up to a single standard of remuneration, irrespec¬ 
tive of the nature of the economic function of the recipient 
(the equality demanded by Mr. Bernard Shaw as the founda¬ 
tion of true socialism), it undoubtedly makes towards equal¬ 
ity of income, only justifying such differences as are mani¬ 
festly useful in securing the more efficient performance of par¬ 
ticular human functions. But this equalisation of income, 
so far as it goes, is not a denial in principle of the equity of 
‘distribution according to needs’, but rather a concession 
to the difficulty of entrusting any authority with so delicate 
a task of discrimination. It should be recognized that 
the failure to do this difficult thing implies a waste. For it 
treats men as if they were equal in their capacity to use 
wealth, though they are not equal. A will get more than 
he can use well; B less. But this waste may be smaller 
than it would otherwise be, provided that the communal 
income is large enough and varied enough. For each man’s 
effective standard of consumption will be determined not 
1 A Grammar of Politics, p. 195. 


EQUITABLE DISTRIBUTION 233 

only by his use or enjoyment of his private income, but by 
his capacity to make good use of the community’s income. 
The goods and services that constitute this common income 
may be altogether free for the enjoyment of all citizens, or 
they may be cheapened by subsidies. While education in 
all its levels, technical and cultural, may be free', train travel 
or the municipal theatre may be subsidised. In either way 
citizen-workers will have their private earnings enlarged 
by access to these stores of public wealth, though in different 
measures proportionate to their differences in inborn tastes 
and capacities of utilising these public opportunities. 

Since leisure is the opportunity of opportunities, the full 
human utilisation of this communal wealth will hinge in no 
small degree upon the distribution of leisure, i.e., in the pro¬ 
portion of spare time and energy after each man’s perform¬ 
ance of his special economic function. One of the greatest 
difficulties in planning an ideal social economy is in the appor¬ 
tionment of leisure in proportion to ability to use it well. 
Those who, like Mr. Bernard Shaw, would solve the diffi¬ 
culty by getting the disagreeable and uninteresting work 
done by a shortening of the working day, only land them¬ 
selves in a fresh quandary. Equality of money income with 
inequality of leisure would signify great waste of communal 
opportunities. For there is no natural adjustment between 
the longer leisure for scavengers or coal miners and the 
shorter leisure of gardeners and teachers with regard to 
their respective capacity to use their leisure. 

§ 7. But, though it is thus manifest that the equitable 
principle of distribution according to ability to use is not 
capable of rigorous application, either as regards income or 
leisure, that is no reason against its recognition, not merely 
as a theoretical ideal, but as an actual goal towards which 
civilised man is advancing with an increasing conscious¬ 
ness of its validity. If we have to make concessions, as 
we have, to self-regarding motives in the endeavour to apply 


234 


EQUITABLE DISTRIBUTION 


the principle, we ought not to repudiate it as offering a genu¬ 
ine criterion for an ethical advance in economic organization. 

The number and size of these concessions to the weak¬ 
nesses of human nature need not, however, be assessed on 
the basis of a purely static human nature. When moralists 
talk of altering human nature they are often misunderstood 
to mean that instincts and desires deeply implanted in our 
inherited animal outfit can be eradicated and others grafted 
on. Now no such miracles are possible or needed. But 
substantial changes in our environment or in our social insti¬ 
tutions can apply different stimuli to ‘human nature’ and 
evoke different psychical responses. For example, by 
alterations in the organisation and government of businesses 
and industries, so as to give security of employment and of 
livelihood to workers, and some increased ‘voice’ to them in 
the conditions of work, it seems reasonably possible to 
modify the conscious stress of personal gain-seeking and 
to educate a clearer sense of social solidarity and service. 
The insecurity of livelihood has been a growing factor in the 
discontent of modern workers, and it increases with an 
education that reveals the ‘social’ cause of that insecurity 
in the absence of any reliable economic government. Secur¬ 
ity is, therefore, the first essential in any shift of the relative 
appeal to personal and social motives. The second essential 
is such alterations in the government of businesses as to give 
to the ordinary worker some real sense of participation in the 
conduct and efficiency of the business. How far that signi¬ 
fies some direct participation in profits need not here be 
discussed. For we are only canvassing the prime conditions 
of ‘a change of heart’ in the workers. How fast and how far 
that change may go, we cannot tell. But metaphors derived 
from organic growth, such as Dr. Marshall used, may not 
give a fair impression of what is possible under some process 
of spiritual conversion, some swift change of intellectual and 
moral attitude, such as some ardent reformers find taking 


EQUITABLE DISTRIBUTION 


235 


place in an active minority both of capitalist-employers 
and labour leaders. The willingness to envisage an ever 
larger part of business as 'public concerns’, with safeguards 
for industrial peace and regularity of employment in govern¬ 
ing bodies representing the interests of capital, labour, man¬ 
agement, and consumer, not merely within the area of single 
businesses, but over the wide provinces of whole industries 
and their interactions in the economic system, is nothing 
short of a new business mentality. 1 Much may depend 
upon the pace at which this new social economy, charged as 
it is with humanist ideas, gains acceptance in the world of 
business as 'a practical ideal’ in Marshall’s sense. At pres¬ 
ent it has gone no further than to produce a sensible soften¬ 
ing of the atmosphere in a hard business world where masters 
and men are still out for what they can get. 

The central importance of security of work and livelihood 
in economic reconstruction is not so much that it would 
lead to a direct stimulation of the sense of social service, as 
that it would call into play many elements of human per¬ 
sonality, some purely self-regarding, others not, which have 
hitherto been stifled or repressed. Indeed, the opposition 
between selfish and social motives or incentives is often 
overstressed. A truly ‘scientific’ socialism would seek not 
to subdue the selfish impulses, but to harness them to the 
chariot of the community. The notion of a single centrally 
organised and controlled economic system, operated by a 
single social incentive, is a manifest absurdity. Industrial 
psychology discloses innumerable different sorts of work, the 
activities of which draw upon a great variety of incentives, 
all of which must be maintained in due relations to one an¬ 
other, if the work is to be done. 

§ 8. How far does this conception of the variety of work 

1 A remarkable example of this distinctively socialistic doctrine is 
to be found in Britain’s Industrial Future: the Report of the Liberal 
Industrial Enquiry. 


236 EQUITABLE DISTRIBUTION 

and of incentives conflict with the realisation of the ethical 
ideal as expressed in the ‘from each to each’ formula? It is 
the will of individual workers that has to go into each par¬ 
ticular piece of work, and that will to work is not directly 
operable by ‘the social will’. A strong centralised bureau¬ 
cratic will, as in Russia or Italy, may for a time by sheer 
domination evoke in the individual a spurious consent to 
work which is not the expression of his own free will. But 
history shows no instance of durable success for a modern 
economic system run along these lines. Modern industry 
cannot be operated successfully by servile labour: it 
demands a real consent to work, and this requires a personal 
interest on the workers’ part, interpreted in narrower terms 
than public service, or the welfare of the community. 

Are we then to conclude that, though socialism and com¬ 
munism are in themselves just and reasonable, they are un¬ 
attainable, because of a certain recalcitrance in human 
nature? Propter duritiem cordis! Or is any idea of apply¬ 
ing ethical conceptions to economic processes a fantastic ir¬ 
relevance? This seems to be the view of some economists. 
Cairnes declared “that in the first place I am unaware of 
any rule of justice applicable to the problem of distributing 
the produce of industry; and, secondly, that any attempt 
to give effect to what are considered the dictates of justice, 
which should involve as a means towards that end a disturb¬ 
ance of the fundamental assumptions on which economic 
reasoning is based—more especially those of the right of 
private property and the freedom of individual industry— 
would, in my opinion, putting all other than material con¬ 
siderations aside, be inevitably followed by the destruction 
or indefinite curtailment of the fund itself from which the 
remuneration of all classes is derived.” 1 In other words, 
if private property and individual enterprise were ethically 

1 J. E. Cairnes, Some Leading Principles of Political Economy, 

p. 263. 


EQUITABLE DISTRIBUTION 


237 


wrong, they would still be economically right! Would 
Cairnes have seriously maintained that a generally accepted 
moral condemnation of private property and profiteering 
would not react injuriously upon the economic value of these 
institutions? Is there not here a real confusion of thought? 
If industry is unworkable, except on a basis of private pro¬ 
perty and individual enterprise, and industry is humanly 
desirable, to assume that this basis might be morally wrong 
is in effect a contradiction in terms. An essential condition 
of a moral good cannot be unjust. But can any line of 
action be just or reasonable if it is impracticable? Here we 
come up against the main objection against socialism and 
communism among liberal-minded economists who clearly 
recognise the unfairness of the operative economic system. 
The late Professor Sidgwick gives concise expression to this 
view when he says, “I object to socialism, not because it 
would divide the produce of industry badly, but because it 
would have so much less to divide.” 1 

Must we then say, “If man were more unselfish and more 
actively social than he is, the communist formula would be 
morally sound. But unless it can be shown that men’s 
actual motives will respond effectively to the moral stimulus 
of this communist principle, a qualification of the principle 
is needed, so as to make its appeal more effective, and is in 
accordance with the dictates of justice?” But if, as we 
agreed, the communist ideal is an ethically sound ideal, and 
is in special situations practicable, it may be serviceable, in 
our closer attempt to assess economic processes in terms of 
ethical or human value, to take it for our starting point and 
to proceed by ascertaining what departures from, or modi¬ 
fications of, this principle are necessary and therefore justi¬ 
fiable for the time being, in considering the various economic 
activities or processes. 

§ 9. But, first, a word of general criticism upon the anti- 
1 Principles of Political Economy, p. 516. 


238 


EQUITABLE DISTRIBUTION 


nomy of selfish and social. An intelligent consideration of 
the human economy, just as it recognises the true harmony 
of personality and community, will moderate the common 
moral estimate of selfishness. Even in its cruder form as 
a craving for personal gain and power, it cannot be con¬ 
demned outright as anti-social and unethical. Reluctance 
to do a large amount of disagreeable and uninteresting work 
is a sound self-protective instinct: a demand for as much 
pay as you can get (in a system where nobody can know 
how much or how little he ‘ought’ to have), is a natural act 
of self-assertion, also with a protective value for the indi¬ 
vidual, and even a selective value for the species. Ethics 
does not require the submergence of the individual will in a 
social will: it seeks to discover and maintain an organic 
relation between the two, the several personalities, as well as 
the community, finding satisfaction in the play of the eco¬ 
nomic system. If it were possible to get a society where 
each was completely dedicated to the common good, the 
condemnation of this socialism on the ground that it crushed 
personalities and destroyed their values, would be valid. 
An ant community would not be a human community. 

What we seek is such a composition of personal and social 
feelings in the members of a society as will lead each to do his 
best and take his ‘fair’ share. In operating such an eco¬ 
nomic society, it is made clear that concessions from the 
absolute principle of the communist principle must be made 
from both sides of the formula. Most of us would agree 
that a highly centralised economic government, seeking, by 
force or moral suasion, to organise all resources for social 
production and distribution, would not work. We could 
not get production run to its necessary capacity, if we dis¬ 
tributed the products strictly ‘according to needs’. And 
this, not merely because it is ‘up against’ certain selfish 
interests, but because the needs distribution is not generally 
accepted as ‘just’. Though everyone would agree that the 


EQUITABLE DISTRIBUTION 


239 


family income ‘ought’ to be utilised according to the needs 
of its several members, and that a sick member might need 
and receive more than a healthy working member, this dis¬ 
tribution does not even appear ‘fair’ or ‘just’ when applied 
to larger social groups. On the contrary, it seems just to 
many that men should be paid according to the output of 
their labour, payment by results. If a man does more, he 
should receive more! In the acceptance of this principle, 
however, it is evident that a certain assumption of expedi¬ 
ency enters into, and even directs, the moral judgment. For, 
if we put the case of two men who exert themselves each to 
his utmost, but one being stronger gets a larger output, it 
does not seem so obviously just that he should be paid more. 
Payment according to efforts or sacrifices, on reflection, 
seems the fairer method. The difficulty here, however, is 
the absence of any reliable test or measure of personal effort. 
But even could such a difficulty be overcome, what we may 
term this second thought on equity of distribution would be 
displaced by deeper reflection in favour of distribution ac¬ 
cording to needs, as the higher ethical ideal. For, behind 
that principle, is no mere vague humanitarianism; the true 
instinct of economy finds its appeal in the fact that distribu¬ 
tion according to needs, or more accurately, capacity to 
utilise, secures a larger aggregate utility out of a given quan¬ 
tity of concrete goods than any other principle. Equity 
here seems to harmonise with economy. 

§ 10. But it will be pointed out with undeniable force that 
a wholesale application of this principle would produce so 
large a shrinkage of the dividend that, though the maximum 
utility were got out of it by such a distribution, the total 
utility would be smaller than that got from a worse distribu¬ 
tion of the larger product under a payment-by-result sys¬ 
tem. This, of course, is the core of the case against 
communism, and it brings us back to the problem of incen¬ 
tives. Useful discussion of this issue has, however, com- 


240 


EQUITABLE DISTRIBUTION 


monly been sterilised by excessive generalisation, a failure 
to distinguish those parts, or processes, of the economic 
system where the needs economy may be practicable from 
those where it may not. Theorists have too commonly 
ranged themselves in extreme positions, confronting the 
respective merits of socialism with those of individualism, 
as if one or other must be right. Meanwhile, economic prac¬ 
titioners, whether figuring as statesmen or as business men, 
have been proceeding by informed opportunism and experi¬ 
mental method to test the opposing principles. The recent 
course of this experimentation in most Western countries 
shows a growing sense of the desirability of distribution 
according to needs as against distribution according to ‘pulls’. 
In Britain a large and growing proportion of the general 
income is already diverted from the economy of private 
‘pulls’ into the economy of needs by the spread of communal 
services, education, health, recreations, and amenities, pro¬ 
visions against old age, widowhood, unemployment, and 
minimum wage regulations. The mere fact that each decade 
shows a larger proportion of workers in public employment, 
where pay and continuity of employment are regulated with 
some definite regard to ‘needs’, marks substantial progress 
along the communist road. The movement, clearly visible 
in many European countries, towards a more equal distribu¬ 
tion of income, by a levelling up of lower wage-rates, limita¬ 
tion of profits in semi-public undertakings, progressive 
taxation of high incomes, higher inheritance taxes, is sanc¬ 
tioned, not merely by a sentiment of justice, but by the 
recognition that by such policies a larger volume of welfare 
is got out of a given body of wealth. 

But the movement concerns itself only with one side of 
the formula of economic equity, the distribution of the 
product. The problem of how to get from each his proper 
share of the human arts of producing the social income re¬ 
mains for solution. The two problems are, of course, 


EQUITABLE DISTRIBUTION 241 

organically related. There are many who contend that the 
equalising and socialising processes we have described have 
already gone so far as to sap the economic incentives of 
production in certain fields. Others rejoin that an inequal¬ 
ity of wealth, which enables a rich class to live luxuriously 
without rendering any appreciable productive service, in¬ 
volves a double waste. The rival problems of the Idle Rich 
and the Idle Poor! 


CHAPTER II 


HOW FAR IS EQUITY ATTAINABLE? 

§ 1. In considering how far a just distribution of work 
and wealth is actually attainable, it is evident that some 
closer scrutiny of the requirements of the productive proc¬ 
esses is needed. The problem of economic organisation for 
the common good is one of experimentation chiefly in the 
field of industrial psychology, so as to determine what eco¬ 
nomic activities can best be organised and conducted by pub¬ 
lic bodies, and what are best left to private business enter¬ 
prise, with guarantees against excesses and abuses. Mr. J. 
M. Keynes has given concise expression to this view. “The 
true socialism of the future will emerge, I think, from an 
endless variety of experiments directed towards discovering 
the respective appropriate spheres of the individual and the 
social and the terms of fruitful alliances between these sister 
impulses.” 1 

The drift towards public conduct, or control, of certain 
types of business in almost all industrially developed coun¬ 
tries is manifest. It is attributable, not to any ideology, but 
to certain characteristics and conditions of these types of 
business. (1) Industries involving large capital outlay, 
and engaged in the supply of goods or services that are in¬ 
dispensable or vitally important, to all members of a national 
or local community, tend to acquire the powers of a 
monopoly. 

(2) Most industries of this order, supplying on a large 
scale the standardised goods for popular consumption, make 

1 The Nation, May 20, 1924. 

242 


HOW FAR IS EQUITY ATTAINABLE? 243 

less call upon the qualities of initiative and enterprise, risk¬ 
taking, and high personal skill, which are so important in 
new and changing industries. 

Though these types of business admit of many variations, 
they may serve here to suggest the general lines of investi¬ 
gation into the problem of the equitable organization of 
industry from the standpoint of productive incentives. 

In order to secure in sufficient quantities the diverse 
commodities requisite to satisfy the present and prospective 
demands of a community with an equalitarian basis of dis¬ 
tribution, what arrangement of incentives to production are 
required? That is one form our enquiry might take. But, 
if it is borne in mind that our main task is that of attempt¬ 
ing an ethical or human valuation of the economic system as 
a whole, it becomes evident that, here as elsewhere, we 
must not accept as final the current standards of ‘needs’. If 
these standards contain articles in themselves undesirable, 
although desired, our human valuation is entitled to reject 
them. For though we have admitted a prima facie case for 
identifying the desired with the desirable, we also recognise 
the right of informed and reasonable judgment to overhaul 
and. to revise the current standards. This position has an 
obvious bearing upon our treatment of incentives. For 
where the conditions of production, needed to satisfy the v 
current demands for certain articles, involve incentives or 
stimuli of work that a^e humanly degrading or otherwise 
injurious, we may hold that such human costs are not to be 
regarded as offset or compensated by higher pay, which, in 
the nature of the case, is likely to be ill-spent from the 
standpoint of human welfare. Put briefly, there are proc¬ 
esses, as there are products, which carry such heavy dam¬ 
ages that any well-advised government will prohibit them. 

§ 2. Thus ethically qualified, our problem may be re¬ 
stated. What rearrangements of industrial organisation are 
needed, in order that adequate incentives may be applied to 


244 HOW FAR IS EQUITY ATTAINABLE? 


maintain the desirable quantities of wholesome wealth, with 
a minimum of human costs in the shape of injury to health, 
intelligence, morals, and other elements of sound person¬ 
ality? 

The scope of such a question is so vast as to make it 
evident that all that can be attempted profitably here is to 
propose some lines upon which social-economic reforms may 
proceed with a prospect of success. The simplest procedure 
is to begin by a general survey of the main sorts of human 
activities that enter production, differentiating them, as far 
as practicable, according to the nature of their urges or 
incentives. 

Here we may perhaps provisionally accept the following 
hierarchy. 

(1) The distinctively creative work of the artist, scientist, 
and, in some degree, the professional man. 

(2) The work of invention or discovery, with some definitely 
utilitarian basis or intention. 

(3) The higher business activities of organisation (technical 
and human) and enterprise. 

(4) Technically skilled work, manual or brain, under manage¬ 
ment. 

(5) Routine work, virtually unskilled, though often needing 
training and practice. 

If we take the accepted grouping of occupations as fight¬ 
ing, farming, arts and crafts, the professions, manufacture, 
transport, trade, we shall find that each of them calls for 
elements belonging to all the sorts of human activity, though 
in widely different proportions. But our purpose is with 
urges and incentives. And here, at the outset, we encounter 
a valuation which appears to cut down, or even to vitiate, 
the commonly accepted ethical standpoint. This standpoint 
would give precedence to the motive of social service over 
any other motives. But the productive activities of the art¬ 
ist and the scientist are intrinsically interesting and pleas- 


HOW FAR IS EQUITY ATTAINABLE? 245 


urable, the creation of beauty and the discovery of truth. 
The creative activity seems to need no outside stimulus. It 
is a natural urge whose attendant satisfaction is its own 
reward. The sense of achievement, fame, and the sympathy 
of others, count in to give a positive balance of utility over 
cost upon the side of work. Such work is so remote from 
most other work that it is commonly excluded from the 
concept of the economic system. But even the artist must 
live, and the terms on which society provides him with a 
living brings him into the economic system, and sometimes 
interfere incalculably with the human worth of his ‘product’. 

I have classed the professional man with the artist and 
scientist, because, like them, he has what is called a ‘voca¬ 
tion,’ work w T ith a human value of its own so intrinsically 
interesting that it can be liberated to a large extent from the 
‘pay’ motive. That sense of a vocation is here closely linked 
with a sense of its utility to others. Social feeling is directly 
implicated. It would seem that society ought to be able to 
get all these higher goods and services, which carry no net 
human cost, by furnishing a decent livelihood. Security 
and sufficiency of pay would leave these workers ‘free’ to do 
their best and most valuable work. The poet, or artist, is 
the supreme example of this costless economy. 

“I do but sing because I must 
And pipe but as the linnets sing.” 

There are conditions of society favourable to this natural 
harmony between producer and society—where poet and 
musician, philosopher and man of science, can work ‘for love’ 
and not ‘for pay’, and where even professionals do not give 
close conscious attention to fees and salaries, or haggle as to 
their amounts. And yet, as we are aware, this purely func¬ 
tional view of a vocation is notoriously false to the conditions 
of modern life. The financial motives of our economic 
system easily corrupt the vocational sense. Men of liter- 


246 HOW FAR IS EQUITY ATTAINABLE? 


ary, artistic, or other creative gifts, are often greedy to ex¬ 
tract from society the full ‘scarcity’ value of their products, 
and even knowingly to prostitute their genius to the market. 
Even more does this apply to the professions which cannot 
be ‘free’ in the personal sense of the creative arts, in as much 
as their work is a direct service to humanity. Moreover, 
the elements of routine and drudgery, from which no work, 
however creative, can be free, enter more largely into the 
professions than the arts. Partly for this reason, profes¬ 
sional men are often as keen money-makers as are trades¬ 
men, and the ‘ethics’ of their profession warrant them in 
exploiting to the utmost the personal emergencies of clients. 

Nevertheless, it remains true that a wide difference exists 
between these sorts of work and ordinary industries. It 
would seem far easier to ‘socialize’ the professions, to convert 
the services of health, justice, religion, education, recreation, 
into public services maintained on fixed salaries out of the 
common purse. In fact, most civilised communities are 
moving rapidly along this road, at any rate as regards the 
more urgent needs of body and mind, while even the fine arts 
are largely communalised by free museums and galleries, 
subsidised theatres and opera houses. Possibly broadcast¬ 
ing, the cinema, and even the newspaper press, when their 
full vital significance is realised, may pass under public 
organisation. 

Here, however, a grave dilemma is presented. On the one 
hand, left to purely private enterprise, these arts tend to 
degenerate into money-making trades, giving the public, 
not what it ought to want, or even what it does want, but 
what it can be made to want on most profitable terms. On 
the other hand, the quality of an art publicly controlled and 
regulated would be exposed to graver damage than that of 
any other service, precisely because it is essentially a fine art 
dependent on the free play of creative faculty. 

There are two possible escapes from this dilemma. One is 


HOW FAR IS EQUITY ATTAINABLE? 247 


to distinguish the higher from the common standards of 
these artistic and professional services, leaving the former 
to the advantage and risks of private enterprise. The 
other is to endeavour to secure conditions of freedom, per¬ 
sonal initiative, and experiment, within the sphere of a public 
service. Education presents the test case. It is a false 
view of education to consider it directed exclusively to in¬ 
dividual character and attainment. It has both a social 
and an individual function. It has to make a child con¬ 
formable to membership of a society with a common body of 
accepted knowledge, and common ways of thinking and liv¬ 
ing. It has, likewise, to discover and improve any special 
qualities and aptitudes of each individual child, so as to give 
increased opportunity to his personality and to enlarge his 
personal contribution to society. 

Some would confine the public teaching to the former 
task, turning out what is substantially a standard child, and 
leaving the individuation to the home or to free private in¬ 
stitutions of higher learning. Others would rely upon the 
liberalisation of publicly controlled institutions for all, or 
nearly all, educational purposes, endowing individual 
teachers with wider freedom in mode and matter of teaching. 
The dilemma, of course, is not peculiar to education. It 
arises everywhere, though not with equal sharpness, because 
in the total economy of a man, the self-regarding and the 
social aspects and activities stand in organic relation to one 
another. It is the pervasive problem of federalism. 

Invention and discovery I treat as distinguishable from 
pure science, regarding them as the high servants of in¬ 
dustry, the direct contribution of science to the material arts 
of life. Great discoveries have sometimes seemed to belong 
so much to the miraculous, or at least the incalculable, as to 
render any estimate of gainful incentives inapplicable. 
History has often seemed to exhibit the inventor as an in¬ 
capable business man, commonly the prey of some more 


248 HOW FAR IS EQUITY ATTAINABLE? 


cunning neighbour. But invention has in large measure 
ceased to be a miracle and has become an art. The natural 
gift is found to be far more widely diffused than was sup¬ 
posed. Moreover, training and direction have greatly en¬ 
hanced the value of the natural aptitude. Research work 
and modern laboratories have multiplied enormously the pace 
of progress. But the attractions of novelty and achievement 
still remain, and thousands of bright trained intellects are 
available on terms of pecuniary reward ridiculously dis¬ 
proportionate to the economic value of the services they 
render. 

§ 3. Perhaps the chief controversy regarding economic 
reconstruction turns upon the functions and incentives of 
the business men who are the organisers, managers, and 
controllers of industrial, commercial, and financial under¬ 
takings. The popular estimate of this business man, his 
character and career, is strongly affected by a type properly 
belonging to an early period of capitalism, in which the 
factory owner or ironmaster forced his way by industry, 
grit, and foresight, founded his business with his personal 
savings or borrowed capital, bought his machinery, raw ma¬ 
terials, and labour, and marketed his product, so as to get 
the maximum profit, which he kept to himself as interest, 
wages of management, and payment for risks. Such hard- 
headed, shrewd, industrious, thrifty, avaricious men built 
up mid-nineteenth century capitalism in Lancashire and New 
England. They must work, each in his own way, and for 
his own hand. They would not function under control of a 
State department, a public board, or even a company direc¬ 
torate, for a fixed salary, however large. They wanted a 
free hand in the control of men, the manipulation of business 
plans, adventure in markets, pursuit of personal gain, the 
seeing a business ‘of their own’ grow and flourish. Arnold 
Bennett well depicts this type in his mid-Victorian ‘Five 
Towns’. It still survives in the less developed manufac- 


HOW FAR IS EQUITY ATTAINABLE? 249 


tures and in some branches of wholesale and retail commerce. 
But big business to-day everywhere runs upon other lines. 
Banking, insurance, and finance, the great staple manufac¬ 
tures, mining, shipping, railroads, electricity, the press, the 
cinema, the theatre, are moulded into joint-stock corpora¬ 
tions. Every year sees a larger proportion of private busi¬ 
ness passing into this form. 

With this change of form there is a change of business 
functions and incentives. The employer-manager is a sala¬ 
ried official, seldom the owner of any considerable share of 
the capital. Salaried experts are employed as buyers and 
sellers, accountants, engineers, and departmental managers. 
Questions of high finance fall to the directors, in British 
companies mostly to the chairman or managing director. 
Even the chairman usually gives only a portion of his mind 
and time to the concern, and most of the directors know 
little of its technique or finance and have interests in other 
businesses to occupy them. 

In no part of our business structure is greater waste dis¬ 
played than in the expensive maintenance of almost func¬ 
tionless directorates. This applies with particular force 
to big business in Britain. “A directorship in a great 
public company, such as a bank or an insurance office or a 
railway, is apt to be awarded to influential people who bring 
business or lend to the concern a colour of respectability and 
social distinction in the eyes of the public, but are with¬ 
out technical qualifications for the management of the 
business.” 1 In less measure this same criticism is applicable 
to the operations of American ‘corporations’ and German 
‘concerns’. 

The severance between ownership and responsibility is, 
however, the most distinctive feature of the joint-stock 
company everywhere. Apart from the investment of their 
money, the shareholders are virtually functionless. They 
1 Britain’s Industrial Future, p. 98. 


250 HOW FAR IS EQUITY ATTAINABLE? 


are the legal owners of the business and take its profits but 
they exercise no real control. For the most part they are 
otherwise engaged in other businesses or professions, or are 
persons of ‘independent’ means, having neither the knowl¬ 
edge nor the opportunity to take any effective part in con¬ 
trol. Most shareholders are not dependent for their income 
upon profits from one particular business, and are satisfied 
if the usual dividends are paid. In any case they are nearly 
helpless. Only when a controlling interest is kept in a few 
capable hands do we find a survival of the character and 
motives of the older business type. 

§ 4. But though orderly routine, subdivided functions, and 
settled salaries may thus seem the distinctive features of this 
business world, there are actions, plans, and policies of 
great delicacy and importance that remain in the hands 
of the modern captains of industry and finance. The pro¬ 
ductivity and profitable conduct of a business depend mainly 
upon the powers of imagination and insight, reasoning and 
calculation, judgment and courage, of great leaders. The 
direction of capital and labour into the proper channels, the 
laying out of the business, the adoption of the best technique 
in production and in marketing, the determination of what, 
when, and where to buy and sell, the relations of competition 
and cooperation with other businesses, economics of finance, 
the handling of politics where it touches business, as in 
tariffs, taxation, etc.—these matters of high policy belong 
to men who, it is contended, must have freedom and power 
and the pecuniary rewards of an adventurous career. 

Some of this high ability is not, indeed, conducive to so¬ 
cially sound business ends. It runs either into wasteful 
competition, financial gambling, or restriction of markets, 
and is responsible for the uncertainty and insecurity that 
everywhere carry such heavy material and moral damages. 
But in a world of economic changes the services of a few 
men with a keen eye upon new inventions and discoveries, 


HOW FAR IS EQUITY ATTAINABLE? 251 

and an accurate forecast of their industrial uses, with a 
sound judgment of men and of business opportunities, capac¬ 
ity of quick decision, and the courage to back their judgment 
in adventurous action, are indispensable to social progress. 

Can the brains and wills of these men be secured for indus¬ 
try consciously directed to the public service? Defenders 
of the present economic order take the following line of 
argument. ‘These great business men are servants of the 
community. Though they make large fortunes, these are 
trifling compared with the benefits they confer on the con¬ 
suming public. Moreover, they are not primarily out for 
money, though money comes to them. They are motivated 
by the love of power, the exercise of skill, and the excitement 
of the business game. Not a few among them are prompted 
by a deep sense of social service, and administer their busi¬ 
ness in this spirit.' But they go on to say, ‘You cannot hope 
to enlist these productive geniuses in the formal service of 
the public. You must not seek to cramp their independent 
initiative and enterprise. A Rockefeller would not adminis¬ 
ter the oil business as well, if you made him chairman of an 
Oil Department at Washington, and Henry Ford's gift for 
organisation and marketing would wither if it had to function 
through a public office. Even more disastrous would it be 
to place the delicate operations of finance in the control of 
salaried officials.' 

Here the struggle between the rival concepts of socialism 
and individualism is closely locked. The socialist looks to 
the undeniable fact that most big business tends to stand¬ 
ardisation and routine and the elimination of free competi¬ 
tion. The individualist insists that novelty and progress in 
production can only emerge under the stimuli of private 
profit-making enterprise. 

§ 5. Now if it be true that the only sort of man who can 
administer industry efficiently and progressively requires 
high pay and a free hand, a reasonable socialism must meet 


252 HOW FAR IS EQUITY ATTAINABLE? 

these conditions. But before admitting it, there are certain 
considerations to be canvassed. Such work is important and 
often interesting: the sense of doing important and in¬ 
teresting things has a high personal value which can be en¬ 
hanced by fame and honour. Where a competitive system 
allows enormous pecuniary rewards for certain sorts of skill 
and enterprise, these rewards will be sought and claimed, 
partly for their own sake, partly as the index of success. 
But were they unattainable, other motives might operate 
with equal force. Self-assertion, power, good fellowship, 
exercise of skill and judgment, reputation, not to speak of the 
satisfaction of doing good useful work—these motives also 
belong to ordinary human nature. An ordered economic 
system might make so much of them that the extravagant 
pecuniary rewards at present paid to lords of industry and 
professional stars might become unnecessary. Indeed, if 
economic progress depends on the discovery and application 
of new knowledge, those processes are ill-served under our 
competitive system. The arts of discovery are ill-organised. 
Our great industries are very slow to furnish the money and 
the brains for research laboratories. Chemistry, physics, 
psychology, even skilled accountancy and finance, mean 
little to most business men. Little attempt is made to 
gather and utilise the innumerable minor improvements 
which can only occur to those engaged in the detailed work¬ 
ing of a plant. 

Is it possible that public services might be so intelligently 
ordered and administered as, not merely to obviate the 
bureaucratic defects of slackness and misoneism, but to en¬ 
courage and stimulate energy, initiative, and progress? In 
answering this question much will turn upon the nature of 
particular industries. In general, it will be contended that 
the long developed industries will accommodate themselves 
more easily to the conditions of a public service, while the 
new and more experimental industries are best left to the 


HOW FAR IS EQUITY ATTAINABLE? 253 


conduct and incentives of private profitable enterprise. 
The crux occurs in such a new industry as electricity, still in 
a highly experimental stage, and yet of fundamental im¬ 
portance to the whole industrial fabric. Can public control 
of such an industry be exercised with sufficient delicacy and 
consideration to safeguard the community against excessive 
or discriminating charges, while providing to the skilled 
engineers and their business backers sufficient monetary 
inducements to secure the most rapid progress of the indus¬ 
try? Here, as elsewhere, we shall recognise that conflict 
may arise between social service and present pecuniary suc¬ 
cess. This is sometimes forgotten by critics of socialism. 
Our Post Office could doubtless be run more profitably by 
reducing or cutting off services in thinly populated and 
less accessible districts of the country, but its social service 
would be thereby reduced. A public service is not bound to 
make good its claim to be well administered by accepting 
the same canons of cost or of prices as rule in profit-making 
business. It may pay higher wages, work shorter hours, 
charge lower rates, than a private business, and yet be jus¬ 
tified morally, and even economically, by its results when 
expressed in terms of welfare. 

§ 6. But even if allowance be made for this difference 
between the strictly business and the welfare valuations, it 
may still be urged that the hope and prospect of great pecuni¬ 
ary prizes will be necessary to secure alike for public and for 
private business certain types of high efficiency. ‘To each 
according to his needs’ even upon a liberal interpretation of 
‘needs’, would not appeal to men who see in money the sole 
or chief index of personal success. While it may be true 
that an economic system, suffused with a spirit of equity and 
social service, will powerfully react upon current criteria of 
personal success, thus weakening the relative importance of 
the monetary estimate, this educative process may be slow 
and insufficient to ‘socialise’ the natures of certain hard, ca- 


254 HOW FAR IS EQUITY ATTAINABLE? 


pable, selfish types of men, who will refuse to give their best 
work unless they are free to take high rents of ability. So 
far as this is true, it would be folly to press an equilitarian 
principle of distribution that failed to take this fact into 
account. The demand for high renumeration in such circum¬ 
stances must be regarded as a necessary cost of production. 

If a great organiser or the inventor of a new technique, a 
great lawyer or surgeon, a painter or novelist of genius, in¬ 
sists upon exploiting his genius for pay, it will be a point of 
sound social economy to satisfy this demand. But not 
necessarily upon the basis of allowing him to take ‘all the 
trade will bear’, the full rents of his monopoly or of scarcity. 
For this full exploitation of his market is not a true measure 
of what he must be paid, in order to get for society the best 
use of his ability. A Rockefeller or a Ford, or any other 
multimillionaire, would do his best if his earning power were 
reduced to a tithe of what he actually takes. A lawyer or 
a surgeon who, in London or New York, can get five thousand 
dollars for arguing a case or performing an operation, would 
do it equally well if he could only get a hundred, as indeed he 
would, if he were working in Sweden or Switzerland, where 
the supply of equally good professional talent is more ample, 
and where the number of persons able and willing to pay the 
higher scale of fees is much less. So with the artist or 
novelist. If he is ‘out for money’, he must have the money 
he is ‘out for’, but not the unchecked exploitation of his 
scarcity value. The qualification is one of great impor¬ 
tance. Discriminative payment is a recognition of human 
facts: unrestricted exploitation of a market is a waste of 
economic resources, due to a defect of economic government. 


CHAPTER III 


INCENTIVES TO LABOUR 

§ 1. So far we have been engaged in considering the dic¬ 
tates of equity and humanity as expressed in the formula 
‘From each according to his powers, to each according to his 
capacity for use’ as they are applicable in the operation of 
our economic system to the higher types of creative and pro¬ 
ductive energy. We now turn to the larger and more in¬ 
sistent question, how far the formula is applicable to the 
grades of wage-labour, the masses of workers doing skilled or 
unskilled, trained or untrained, labour, with hands or brains. 
How far would attempts to put our equitable formula into 
practice disable society from getting the necessary and de¬ 
sirable quantities and qualities of this labour-power for the 
processes of production? 

The problem is new, alike in shape and in intensity, be¬ 
cause of the new attitude taken by workers towards their 
work. Until lately, even in the developing industrial coun¬ 
tries, a customary acquiescence, qualified by grumbling in 
bad times, was the normal attitude. Such conflicts as oc¬ 
curred between employers and employed were generally 
confined to some specific concrete grievance, usually of 
rates of pay, and scarcely ever envisaged any active quarrel 
with the status of the worker in the system. The worker 
in most trades, and in most countries, has now broken away 
from this traditional attitude. Now predominantly a 
townsman, in constant personal contact with numbers of 
fellow-workers in his own and other trades, and sensibly 
affected by the rapid changes in material conditions by 
255 


256 


INCENTIVES TO LABOUR 


which town life itself has been transformed in the last half- 
century, he has acquired new ways of life, demands better 
housing, clothing, amusements, and is interested in education 
and politics. From such sources he has acquired a new 
sense of personal dignity and freedom. ‘Ideas’ have got into 
his head—and hers. For the larger part played by women 
in the world of industry outside the home is an important 
factor in the new labour situation. 

New conscious ‘claims’ of labour have arisen, of varying 
form and appeal in different countries and occupations, but 
in general conforming to a single pattern or ideal. For 
convenience they may be grouped as follows: 

(1) Claims relating to pay. Demand for ‘fair’wages, and for 
some share in ‘profits’, either in the shape of wage-rises, or of 
some other ‘sharing’ process. 

(2) Claims relating to other ‘conditions’ of labour, such as se¬ 
curity of employment, shorter hours or more leisure, and protection 
against driving and other exhausting practices. 

(3) A ‘voice’ in the control of the business, so far as it affects 
the employee, with a growing realisation that every activity within 
the business, including technique, finance, and marketing, does af¬ 
fect the employee. Thus a ‘voice’ tends to expand into a ‘share’ in 
control, or even ‘the control’ of business. 

§2. In any moral interpretation and valuation of the 
economic system these claims and attitudes are of deep sig¬ 
nificance. How far are they consonant with an equitable 
transformation of business forms and government that is 
capable of delivering the material and human goods? 

In Britain, and more or less throughout the Western world, 
the growing productivity of the industrial system in the 
nineteenth century seemed to give attainability to the more 
urgent and more conscious claims. Real wages had risen 
four-fold during that century, there was a general shorten¬ 
ing of hours, and a development of organised bargaining 
between capital and labour had evoked a new collective 
consciousness and sense of power in labour. The check 


INCENTIVES TO LABOUR 


257 


upon wage-increase in the present century for most workers 
in most countries brought bewilderment, consternation, 
anger, and a new dangerous state of mind. Science was 
busily performing new economic miracles. Motor cars, 
radio, electric power, aeroplanes, stirred the imagination and 
ambition of the workers. Luxurious expenditure was 
flaunted everywhere. Productivity per head of the workers 
was advancing rapidly in certain important trades. Its 
progress seemed illimitable. It should surely be possible 
to banish poverty and insecurity of life, and to extend 
comforts and leisure to all! 

Quite evidently there existed obstacles to the fulfilment 
of these aspirations. The power was there for use, but it 
could not be utilized. Attempts to use it were held up by 
gluts, collapses, and depressions. Hence there grew up, 
both on the side of capital and of labour, a definite practice 
of ‘ca’ canny’, a policy of restricting output, lest enlarged 
supplies, with falling prices, should lower profits and wages. 
We are not called on here to discuss this tangled issue of 
industry and finance, but only to note its effect upon the 
mind of wage-earners. 

In considering the related questions, “How far are the 
claims of labour equitable?” and, “How far are they prac¬ 
ticable?” we are bound to take into account what we term 
the new mentality of the workers. And yet, as soon as the 
complexity of industry is adequately realised, the futility of 
thinking and speaking of a single working-class mentality is 
obvious. Though there exists some sense of solidarity, of 
sharing the same fate, among workers in various grades and L 
occupations, there is also a wide diversity of attitude towards 
jobs. 

Some productive activities, as we recognise, are liked on 
their own account, and their products might be got by society 
without any other cost than the ‘keep’ of the producer. 
William Morris feigned an earthly Paradise in a community 


258 


INCENTIVES TO LABOUR 


of men and women whose diverse tasks, inclinations, apti¬ 
tudes, and opportunities, led them by sheer delight in personal 
activity to produce so much food, clothes, housing, furniture, 
and other goods, that anyone might help himself freely 
from the common store. A manifest extravaganza, but yet 
suggestive of large human economics which the better 
discovery of human aptitudes and greater freedom in the 
choice of work might effect. 

§ 3. A good many sorts of work can carry enough in¬ 
trinsic interest to be ‘costless’ in the human sense. The 
lamentations over the replacement of manual skill in the 
arts and handicrafts by the machine are often overdone. 
The limitations and monotony of most hand-labour stifled 
interests, the elements of creative activity and personal initia¬ 
tive playing too small a part to compensate the toil. For 
even skilled manual labour, save in the most primitive 
communities, has been so subdivided as to carry little of 
that satisfaction of the artist or craftsman who makes a 
complete thing. On the other hand, there is considerable 
scope for interest in the machine economy, outside the mere 
‘tending’ processes. The care of machinery, its adjustment 
and repair, the work of skilled engineers and overseers, the 
increasing proportion of employment in processes of testing, 
costing, marketing, play a larger part in many manufactur¬ 
ing industries. Transport and distribution, which con¬ 
tinually employ a larger proportion of the workers, contain 
much scope for personal skill and judgment in detail, and 
lie outside the ‘drive’ of the machine. 

Such elements of interest in ‘the work itself’ are usually 
disparaged. Work calling for very little technical skill may 
be interesting if it carries detailed variety, while work of 
considerable skill loses its interest when carried on for a 
long working day. Here emerges an alternative choice 
between a short work-day and a varied work-day. When 
possible, change in work has a double value. It lightens the 


INCENTIVES TO LABOUR 


259 


human cost to the worker, and it raises his productive effi¬ 
ciency. Some employers are discovering that it does not 
‘pay’ to keep a worker too long on the same job. But variety 
in the work itself is not the only condition that can make 
work interesting. The social circumstances which attend 
it often count. Contact with numbers of different persons 
and incidents is extremely interesting to alert minds. 
Policemen, and to a less extent postmen or ’bus conductors, 
have opportunities to get a knowledge of life and character 
which greatly alleviates routine. Partly for this reason, 
domestic servants prefer work in hotels to work of the same 
kind in private houses. There are more personal contacts. 

Again, routine work, uninteresting in itself, is preferred 
by some workers. It takes less out of them, if it does not 
involve heavy physical toil or close mental concentration. 
Many people do not want to think, or to take responsibility. 
They are willing to submerge their private personality for so 
many hours a day in obedience to easy orders, in order to 
conserve energy for leisure interests or home life. A certain 
amount of routine monotonous work does not ‘cost’ much. 
Here is the chief argument for a shorter work-day. It in¬ 
volves less human cost, and it leaves more time for the 
utilisation of all economic goods and other non-economic 
opportunities. Consider what hard plodding work men will 
do for exercise or ‘sport’, and it becomes apparent that a 
good deal of common labour in the form of digging, carrying 
weights, laying bricks, even tending machinery, might be got 
‘gratuitously’. No rearrangement of industrial society 
could, of course, get all the necessary work done by this 
strictly ‘costless’ method. There are many sorts of work so 
disagreeable that nobody would undertake them except for 
pay. And for most other routine work, even under shorter 
hours, rest intervals, and other humane conditions, a heavy 
net cost is involved. 

Heavy human costs, in terms of health and personal safety 


260 


INCENTIVES TO LABOUR 


in many occupations, notoriously figure low as economic 
costs. Ignorance makes workers indifferent to many health 
conditions, while risk-taking may even figure as an attrac¬ 
tion. Soldiering is a crucial instance, though other motives 
here temper the zest for danger. But as education in hygiene 
becomes more general, and public policy concentrates more 
strongly upon health conditions, the human case against 
many sorts of labour, done under conditions that seem 
unavoidable, will concentrate more and more attention on 
reforms of technique, upon the one hand, reforms of con¬ 
sumption on the other, with a view to the elimination of the 
sorts of work that carry these costs. 

The most important practical reforms in the reduction 
of human costs lie in altering the relation of the machine- 
worker to the machine, so as to make him the master 
instead of the servant. The right rhythm in work is now 
recognised as a prime element in easing costs. There is 
sometimes a truly mortal conflict between the rhythm of the 
machine and the rhythm of life. Machine-rhythm and 
speeding-up often extend far beyond the direct processes 
of machine-tending, so as to dominate the atmosphere of 
the ‘works’. Half-consciously the resentment of the modern 
worker against the capitalist system is in no small degree 
a personal craving for freedom as to pace and method in the 
performance of his work. It is not true, however, as Ruskin, 
Edward Carpenter, and other humanist protesters assert, 
that of necessity the machine must mechanise the worker, 
destroying or reducing his humanity. I doubt whether 
the professional chauffeur is a less human, less interesting, 
and less intelligent type of man than the driver of horse 
vehicles, because the thing he drives is a mechanism, not an 
organism. 

§ 4. From the standpoint of occupational and other 
attractions and incentives, the difference of city and country 
deserves separate consideration. In every developed coun- 


INCENTIVES TO LABOUR 


261 


try a selective suckage of population from rural into city 
work and life has taken place. The human significance and 
value of this distinctively economic movement are difficult 
to assess. Vital statistics have generally given a clear con¬ 
demnation based upon the higher adult death rate in the city. 
Racial degeneration was predicted as the inevitable result 
of transferring the more energetic and adventurous stocks 
from the comparatively healthy life and work in the country 
into the physically costly life of the city. The great im¬ 
provement in the sanitary conditions of cities, and in par¬ 
ticular the progress in maternity and child welfare, have, 
however, greatly reduced the force of this indictment, though 
it may still be maintained that the relative or absolute de¬ 
cline of rural populations, due to the economic and social 
attractions of the town, involves some loss of human values. 
Whether, or to what extent, this be true, must depend chief¬ 
ly upon our valuation of the economic and social advantages 
of town life for varying types of ‘human nature’. For 
countless generations the animal man in his physical and 
mental make-up had been selected and modified into a vital 
adjustment to a substantially unchanging material and social 
environment. In a very few generations the majority of 
these animals in most ‘civilised’ countries are called upon for 
an effort of quick readjustment to a very different and a very 
mobile environment that seems likely to be putting an ex¬ 
cessive strain upon the human capacity of adaptation. But 
since man is primarily differentiated from other organisms 
precisely by his superior adaptability, the danger of town 
life and work cannot be taken for granted. The new work 
of adaptation it calls for may so stimulate and nourish the 
adaptive faculty itself as to enable a mutation or conversion 
to take place involving no serious loss or damage. Or it 
may be urged that the selection of migrating men and women 
means that the stock which is more adaptable moves into 
town life and work while that which is less adaptable re- 


262 


INCENTIVES TO LABOUR 


mains behind. A considerable validity must attach to this 
contention, alike as regards migration into towns and into 
other countries. Nor is the fact that, even with the im¬ 
proved hygiene of cities, the duration of life is greater in the 
country, conclusive as a test of human value. If “better 
fifty years of Europe than a cycle of Cathay”, the greater 
intensity and variety of conscious life for townsmen may 
compensate the slightly longer duration of rural life. But, 
on the other hand, it cannot be assumed that a higher human 
value attaches to city life for all sections of its dwellers be¬ 
cause they have ‘chosen’ that life in preference to the other. 
For, as regards many of them, the choice is not a free 
one. Economic conditions, as for instance in modern Eng¬ 
land, may have let down employment in rural industries in 
volume, in regularity, or in remunerativeness, so much as 
virtually to compel migration into the towns. But even 
where choice has been more free, and young labour has quit¬ 
ted the village life for the higher pay and more exciting life 
of the city, we cannot assume a net human gain of values. 
The strain of nervous adjustment to the pace of a changing 
environment may inflict some serious injury to the individual 
or the stock. If it be true that the prime functions of good 
digestion, wholesome exercise, and sound sleep, are impaired 
by city life, it is difficult to believe that the intenser and more 
various consciousness of the city dweller can be an adequate 
compensation. The attractions of town life to youth may 
be no guarantee of gain, even if the current valuations be 
accepted as a reliable index of human welfare. If what we 
call the intrinsic interest of work be estimated, the scale 
would hardly turn in favour of town occupations for the 
great majority of workers. The organic nature of crops 
and herds in relation to varieties of soil and climate, which 
gives character to agriculture and most rural occupations, 
may have a permanent superiority of interest over the 
more routine and mechanical pursuits of town economy. 


INCENTIVES TO LABOUR 


263 


This may, as we recognise, be offset wholly or in part by 
the higher pay, shorter hours, greater sociability, exhilarat¬ 
ing recreations, and other advantages of towns. But the 
loss of man’s easy, regular contact with nature in its less 
tamed forms and less regulated moods, will remain a debit 
in the human balance, both on the side of work and life. It 
would, however, be unfair to register such a judgment with¬ 
out important qualifications. If the town worker be pro¬ 
gressively released from the domination of the machine, and 
increased leisure, recreation, and facilities of movement en¬ 
able him to take an intelligent and pleasurable interest in 
country life and even to prefer it for his residence to the 
crowded city street, he may get the best of both worlds. 

Again, the new invasion of agriculture, rural industries, 
and village life, by modern machinery and power in the 
shape of steam-ploughs, electric tractors, etc., the spread of 
telephones, radio, automobiles, cinemas, may do more to 
alter the lot of men and women throughout the habitable 
world than any other happening. To live in the country 
and to work in the town is one way of reconcilement. To 
‘civilise’ the country for purposes alike of work and resi¬ 
dence is another way. The two, indeed, permit of various 
grades of union or compromise. At any rate, the sharp¬ 
ness of the older divergence has disappeared, and the result 
will be to give a greater and a freer choice to the great body 
of workers in their occupations and their ways of living. 
If the economic compulsions and restrictions which have 
hitherto cramped effective liberty of choice are removed, 
and positive opportunities of reliable information are 
open to all, we might reasonably hold that a sound natural 
selection will distribute the working population among 
town and rural industries on the basis of personal apti¬ 
tudes and tastes. Thus, reverting to the familiar eco¬ 
nomic dichotomy, the human costs of production will' be 
reduced, and the human utilities of consumption enhanced. 


264 


INCENTIVES TO LABOUR 


§ 5. The claim of workers to have a ‘voice’ in the control 
of the business, so far as conditions of employment are con¬ 
cerned, is perhaps a mild expression for the new attitude of 
labour towards the industrial system. Primarily it is a 
revolt against what is called the ‘commodity’ view of labour, 
which treats it as one among several requisites of production 
to be bought in such quantities as are from time to time 
required at a price determined by the higgling of the market. 
Now labour, as we see, differs from other marketable goods 
in that its delivery involves the subjection of all the other 
elements of a personality to the economic process. The 
claim for a ‘voice’ in the business is in the first place a natural 
self-protective measure, directed to secure those personal 
interests that are not formally included in the wage-bargain. 
It may, no doubt, be said with truth that the wage-bargain 
does take cognisance of the peculiar conditions of the deliv¬ 
ery of labour, that wages, hours, and various legal and cus¬ 
tomary regulations and restrictions, are designed to take 
into consideration the human as well as the distinctively 
economic cost of labour. But, as we have already recog¬ 
nised, the wage-bargain makes no adequate provision for 
many of these human costs, even for the heavy cost of inse¬ 
curity of employment. The workers’ demand for a voice in 
management is, firstly, to be understood as a growing rec¬ 
ognition of his sense of personality, and the need of its pro¬ 
tection. 

But a second stage is reached in the development of a 
sense of right or property in the business for which he is 
working as an integral unit. Legally the business belongs 
to the shareholders whose function is passive; actually the 
workers have a feeling that it ‘belongs to’ them, in that their 
lives are implicated in its working. They belong to it and 
so it belongs to them. This is not a clear thought or convic¬ 
tion: it harbours no confiscatory policy. But it involves a 
feeling that, as the management is primarily engaged in 


INCENTIVES TO LABOUR 


265 


conducting the business for the profits of shareholders, their 
deeper interests in its operation are liable to be a subordin¬ 
ate consideration. For them it is of vital moment that the 
business shall be so operated as to furnish regular employ¬ 
ment at good wages and with other good conditions. But in 
order to ensure these vital interests of labour, its government 
must recognise that those interests must rank above the 
interests of the shareholders, in the sense that fair wages and 
good conditions are a first charge on the assets. So long as 
the government of business is entirely in the hands of the 
representatives of its capital, this security for labour cannot 
exist. Though it is urged that in great corporations, the 
power of shareholders is negligible and the directorate and 
management tend more and more to conduct the business 
in the spirit of a public service, giving due consideration to 
all reasonable claims of labour, intelligent workers do not 
readily acquiesce in this theory of benevolent oligarchy. 
They ask for some representation upon the ‘controls’, with 
full access to all sources of information which affect their 
interests, as a necessary safeguard of those interests. In 
effect, they seek to base the government of a business upon 
a proportionate representation of the vital interests involved. 
No doubt few among the workers adopt consciously this 
principle, but it underlies the whole movement of Trade 
Boards, Joint Industrial Councils, and other similar experi¬ 
ments in Europe and America. Starting as a narrowly pro¬ 
tective measure of wage-earners, it moves towards a 
democratic government for businesses and industries, in 
which the different factors of capital, management, technical 
staff, and various grades of workers, shall cooperate in run¬ 
ning business for their common gain. How far and how 
fast this reconstruction of the forms of economic structure 
may go depends chiefly on the application of the repre¬ 
sentative principle to various types of industries—a matter 
for experiment to settle. 


266 


INCENTIVES TO LABOUR 


The deepest moral value of this demand of labour for a 
share in the government of industry consists in the fact 
that it is an essential condition for the growth of the sense 
of industry as a social service. So long as the thoughts of 
a worker do not, and cannot, go beyond the near implications 
of his labour-bargain, and his sense of cooperation is confined 
to his trade-union, it is idle to suppose that the more general 
problems of our economic system can be rightly solved. It 
is sometimes contended that social good will cannot be 
created by structural changes in government. But this is 
not true, so far as these structural changes are themselves 
impelled, in part at any rate, by a sense of defective coopera¬ 
tion in the old structures. A double process of adaptation 
takes place. The movement towards these structural 
changes, inspired by dissatisfaction with friction, conflict, 
ill will, moulding the new forms, educates that very spirit of 
common purpose for which the new forms furnish suitable 
channels for fuller play and more conscious realisation. 

There is, however, in this movement a danger. In the 
practical business world it is natural that ill will and conflict 
within the business and the trade should absorb attention, 
and that reform energies should be chiefly concentrated on 
securing good relations between capital and labour in these 
areas. But a reconcilement of the interests of the produc¬ 
tive factors in the several businesses and industries, as we 
have recognised, by no means suffices to set the economic 
system as a whole upon equitable lines of social service. 
Harmony of capital and labour in a business, or a trade, 
may have its first result in enlarged product and lower costs. 
But if the fruits of this economy are distributed in profits 
and bonuses within the business, the current of good will is 
short-circuited. Indeed, there are many instances of trade 
combinations and cartels where capital and labour work 
together in unity on a policy of regulated output and control 
of markets, distributing in high dividends and wages both 


INCENTIVES TO LABOUR 


267 


the economics of good labour relations and of price fixing. 
This restricted harmony may prove inimical to the sense of 
social service and to the moralisation of industry as a whole. 
Shifting the area of conflict from the struggle of capital and 
labour (or employer and employed) within the business or 
trade to a struggle between the better organised and the 
worse organised trades, the sheltered and exposed trades, it 
may intensify the struggle. 

The claim for a voice in the control of business, a repre¬ 
sentative government of the business, with a property in the 
shape of workers’ shares and profit-sharing, may thus signify 
the substitution of a new stratification of interests for the 
older simple cleavage between capital and labour, without 
securing either industrial peace or a sense of social service. 
But the general approval accorded to the new business or¬ 
ganisations, both in regard to their suppression of wasteful 
competition among the constituent businesses, and in regard 
to their constructive labour policy, is inspired by a just feel¬ 
ing that this movement, by eliminating many of the nearest 
and most personal grievances and hostilities, may liberate 
and educate a wider and more conscious sense of the soli¬ 
darity and social value of the economic system as a whole, 
and may make it more feasible to regulate its processes by 
considerations of human welfare. 

§ 6. Enquiry into the claim of labour to a Voice’ in the 
government of business, has led us into a wider channel of 
reflection, the whole of which, however, has a real relevance 
to our particular theme, the motives and incentives of the 
workers. 

These large policies of reconstruction should all help to 
give reality to interests and motives that lie outside the 
immediate and insistent claims for personal gain. If secur¬ 
ity of employment and livelihood with some prospect of 
material advancement, was attained by better business and 
social regulations, the sense of the social utility, the func- 


268 


INCENTIVES TO LABOUR 


tional view, of work would undoubtedly come to occupy a 
place in the common consciousness which is precluded by 
the selfishness imposed by the present conditions of the 
struggle for livelihood. 

How far is it possible, however, to look forward to an 
industrial order that can thus far incorporate the principle 
of ‘distribution according to capacity for use’ ? Our brief 
survey of the mental attitude of workers towards their work 
does not seem to warrant a conviction that the principle is 
capable of close application. There are, indeed, many evi¬ 
dences that this equitable and human principle is gaining 
ground both in the higher ranks of salaried employment and 
professional work, and at the foundation of the industrial 
fabric, where it takes shape in the payment of a ‘minimum’, 
‘subsistence’, or ‘fair’ wage, with a favourable disposition 
towards ‘family allowances’ as a formal or informal basis of 
differentiation. In these and other ways we perceive the 
‘functional’ principle displacing or qualifying the ‘acquisi¬ 
tive’. With the growth of public and quasi-public services, 
where security of employment and non-competitive condi¬ 
tions prevail, an increasing proportion of employees are 
coming under this more equitable economy. It is fair to 
conclude that over an even larger area of employment, this 
public service attitude of mind will humanise the incentives 
of employees, evoking some conscious sense of duty in the 
performance of their work, and some tacit recognition of 
the equitable conditions of their employment. 

There remain, however, two stubborn obstacles to the 
general adoption of the principle. As in the higher grades of 
business, we recognize that there are types of men whose sense 
of social service is too feeble to allow them to forego the large 
prizes which their skill or enterprise enable them to secure, 
and that it may be desirable to compromise our distribution 
principle to meet their case, so with the wage-earning classes. 
Here, too, there may be workers, or even groups of workers, 


INCENTIVES TO LABOUR 


269 


occupying key positions in some industry, or possessed of 
some training with a high scarcity value, who will reject the 
principle of payment according to needs, or capacity for use, 
and will insist upon higher scales of remuneration. Until 
education and enlightened public opinion are strong enough 
to eradicate, or at least to moderate, these selfish claims, it 
will be necessary for society to discover and to practice an 
economy of concessions. Nice calculations for such pay¬ 
ments may not be possible, and it may be best to err upon the 
side of liberality, leaving any excess to be redressed by pro¬ 
gressive taxes upon income and inheritance. 

The other obstacle relates to what we may call the lowest 
grades of work. It is idle to ignore the basic fact that most 
ordinary routine manual or mental work, necessary to main¬ 
tain the efficient working of our present economic system, is 
disagreeable in its nature, amount, or conditions to those who 
perform it, and that much of it carries real costs of a heavier 
kind, and that it is injurious to the personal welfare of the 
workers. Common costs are long days of tedious or tiring 
work of narrow routine, using certain muscles or nerves ex¬ 
cessively and atrophying others, often in bad air, sometimes 
with danger to lungs, heart, or limbs. To well brought up 
persons of the upper classes most wage-work would seem so 
intolerable, as a condition of life, that no payment would 
compensate the personal damages. Society in the past has 
been able to get most dirty work dirt cheap, because of the 
poverty, ignorance, and brutality of living among large grades 
of humanity. The heavy human costs of such work were 
hardly recognised by those who bore them as part of a cus¬ 
tomary burden. But as workers come to eat of the tree of 
knowledge, gain self-respect, decent standards of living, and 
the element of personal culture, these human costs of com¬ 
mon toil become conscious. It will become increasingly 
difficult to get the more ‘costly’ kinds of work done, even for 
high wages and short hours. Some of it can be dispensed 


270 


INCENTIVES TO LABOUR 


with. Oil or coal-dust comes to replace the costly work of 
ship stoking, and in many toilsome tasks automatic machin¬ 
ery takes over the human costs. Where heavy, risky, or 
tedious work remains, the rising price demanded by the new 
consciousness of the workers brings many alleviations. 
International conventions regulating hours of labour, and 
prohibiting dangerous processes in chemical and other trades, 
mark a new era of economic enlightenment. 

Such reforms are not infrequently brought up against 
serious obstacles, due to long established methods of con¬ 
sumption. Improved conditions of pay and hours in heavy 
or disagreeable work are liable to be found ‘impracticable’, in 
the sense that the product of such work cannot be marketed 
so as to ‘pay its way’. Here is part of the tragedy of the 
British coal mines. It comes to this, that, as the general 
body of the people becomes more educated, more civilised, in 
the advanced countries, it will become more and more diffi¬ 
cult to get some essential services performed except by an 
exaction of rates of pay which bear no proportion to the 
‘needs’ of the recipients. This thought or feeling has always 
underlain the objection of the well-to-do classes to any 
real measure of popular education. It will make the workers 
‘too proud to work’, too particular as to the kind and amount 
of work they will do: so wages must rise to heights that may 
seriously curtail rents, profits, and other sources of surplus 
incomes. It is already evident that considerable changes 
are taking place in the proportionate rates of pay for skilled 
and unskilled, interesting and dull, respectable and unrespec¬ 
table employments, the less desirable rising towards or 
beyond the level of the more desirable. The time may come 
when navvies, sewer-cleaners, bus-conductors, booking 
clerks, may in general get incomes exceeding those of doctors, 
teachers, and ordinary ‘managers’, by compensation for the 
net human costs of work found to be indispensable. Here 
is another violation of the ‘needs’ principle of distribution. 


INCENTIVES TO LABOUR 


271 


§ 7. This general survey enables us to realise the main 
directions in which the demands of our economic system 
seem to conflict with the demands of ‘human welfare’. It 
raises the following questions. 

(1) In what ways and to what extent can the human cost of 
industrialism be reduced ? 

(2) How can intelligent interest and a sense of social service 
be got to function more effectively as economic incentives ? 

(3) How far can productivity of industry be raised without 
raising human costs, by better organisation and technique? 

(4) Can this increased product get better distribution? 

The whole problem of economic reformation in the light 
of human values is contained in these questions, to which our 
survey enables us to give the following tentative replies. 

(1) Reduction of human costs depends, partly, upon im¬ 
provement in the technique of industrial processes, the 
substitution of mechanical for human energy in dull, heavy, 
routine processes, better protection for life and health in the 
factory or other work place; partly, upon the better appor¬ 
tionment of the various sorts of work among members of a 
community. That the heavy muscular labour should be 
performed by strong, able-bodied men, and that none of it 
should be shifted on to feeble men, women, or children: that 
young persons, before entering on industrial life, should go 
through a searching and an educative process, directed to 
discover and improve any special aptitudes, and to place 
them where these abilities may be most usefully employed: 
that information as to economic needs should be so widely 
accessible as to give the freest opportunity to all to work 
along the lines of personal choice—such economics are so 
obvious as to require no lengthy exposition, though they are 
very far from being adequately realised in any existing na¬ 
tional arrangements. Among reformed ‘conditions of 
labour’ the shorter work-day ranks highest as a cost reducer, 
provided it is not attended by acceleration in the pace of 


272 


INCENTIVES TO LABOUR 


work. For, though this policy may signify some reduction 
per worker per diem in output, this loss of objective wealth 
might be compensated fully from two sources: (a) greater 
regularity of employment, when ‘driving’ and spurts with 
‘overtime’ were made impossible, and where absences from 
ill-health and over-strain were less frequent; (b) the super¬ 
fluous labour engaged at present in the largely wasteful 
competition of distributive processes could be drawn into 
industry to make good any deficiency of productivity from 
a shorter work-day and abolition of overtime. Such a 
regularisation of employment and productive efforts would 
greatly diminish the net human costs of industry. 

(2) Though highly subdivided labour is intrinsically 
uninteresting, under a shorter work-day education could do 
something to bring home to the worker its social value and 
significance. Many years ago the Swiss cooperative socie¬ 
ties set an example, since followed in other countries, of the 
practical instruction of their employees and members in the 
history of the goods they supplied, exhibiting specimens of 
the different raw materials and linking up the diverse proc¬ 
esses by which they passed into consumable commodities. 
Carried on as an integral part of the ‘welfare work’ which 
is helping to humanise industry, this education could do 
something to redeem the narrow unmeaning drudgery in¬ 
separable from much of our subdivided labour. 

Questions 3 and 4 raise the intimately related issues of 
higher productivity and better distribution. Though these 
issues transcend the labour problem in their application, they 
there find a particular significance in the controversy as to 
which of the two desirables takes precedence in time. 
Statisticans assure us 1 that even in Britain, the wealthiest 
European country, the whole income, equally divided among 
the people, after due provision for savings and public 

1 Cf. Stamp, Wealth and Taxable Capacity. 

Bowley, Division of the Product of Labour. 


INCENTIVES TO LABOUR 


273 


revenues, would not suffice to furnish all of them with a 
comfortable livelihood. It is, therefore, urged that labour 
must first help to raise the volume of production and then 
can claim its increased share. To this labour economists 
rejoin to the effect that better distribution, placing a larger 
proportion of the general income in the possession of the 
workers, is a prime condition to any real increase of produc¬ 
tivity. It operates psychologically to raise the moral 
efficiency of the worker, the will to work, and economically 
by furnishing a larger and more reliable market by means 
of the rising standard of consumption among the workers. 
They point to the policy of Henry Ford: first raise wages, 
increased efficiency will follow, bringing greater produc¬ 
tion, lower prices, larger consumption. The increased 
productivity from higher wages does not, however, come 
chiefly from the raised efficiency of the wage-earners, but 
from the stimulus to the management to find new economies 
of technique, organisation, and marketing, so as to enable 
them to earn profits on a higher wage-bill. But while this 
problem has its place here as relevant to the claims of labour, 
its wider aspect belongs to the enquiry into the interactions of 
production and consumption which we enter after our analy¬ 
sis of subjective costs is completed. 


CHAPTER IV 

THE SUPPLY OF CAPITAL 

§ 1. Thus far we have addressed ourselves to the con¬ 
sideration of the chief personal activities directly engaged 
in the production of wealth, regarded from the standpoint 
of the human costs and satisfactions of those who engage in 
these activities. The artist, the inventor, the manager, the 
engineer, the financier, the various grades of brain and 
manual workers who give out productive energy have been 
brought under brief survey, with a view to considering how 
far their efficient services are compatible with proposals for 
running industry on an equitable basis. 

It remains to put to the same test the function of the 
capitalist, the man who gives his title to the modern eco¬ 
nomic system. In theory, and to a large extent in practice, 
the dominating motive in business is the desire of the 
investor to get gain for himself in return for the capital he 
supplies. The land, buildings, machinery, materials, and 
goods, together with the good will, that constitute the fabric 
of the economic system are all his legal property: they have 
been brought into economic existence and are operated as 
business units in order to pay him dividends. The regular, 
sufficient, and, in a progressive society, increasing supply of 
this capital is essential to the working of the system. 

It is manifest that this assertion of the permanent claim 
of capital is liable to involve some confusion of thought and 
some conflict in action. The ethical or humanist view is that 
the economic system exists in order to utilise man’s produc¬ 
tive energy for the satisfaction of his human needs. How 

274 


THE SUPPLY OF CAPITAL 


275 


far is this compatible with the view that each business unit in 
this system exists in order to pay dividends to its owner? 
This conflict of meaning and of morals has always in some 
degree bred a feeling or opinion in the worker that he was 
the sole producer, and that what went in interest or profit 
to the owners of the capital or land really belonged to him. 
This feeling, or opinion, unless theorised and propagated, 
figures very dimly in working-class consciousness, but at 
all times it has been ready to respond to strong suggestion. 
This is only natural. The worker daily realises that he 
and his fellows are giving out personal energy which changes 
material into something different and more advanced: he 
does not realise that the capitalist is ‘doing’ anything, nor 
in his sense is he. He is an ‘idle capitalist’. What he has 
done in the past is to save, and even the savings he makes, 
when seen in the concrete form of machinery, plant, etc., 
have been made, not by him, but by the ‘workers’. This 
view that the capitalist does not do any work for the divi¬ 
dends he gets is mixed up in the working-class consciousness 
with the feeling that, in buying their labour, he is in an un¬ 
fairly advantageous position, and so gets it cheap. Finally, 
because he can buy labour cheap, he can sell the product 
profitably, and out of the profit can, with a personal sacrifice 
that is theirs, not his, make savings and so increase his owner¬ 
ship and use of capital. This notion of the capitalist as an 
oppressive bargainer no doubt goes back to the times when 
there was virtually no use for productive capital, and when 
usury was the principal employment of men with money to 
spare. 

The condemnation of interest on the ground that ‘money 
is barren’, uttered by Aristotle and endorsed by a succession 
of moralists and philosophers until the close of the Middle 
Ages, did not seem unreasonable when those who had more 
money than they needed for spending kept it idle in a chest 
or hide-hole. To extort interest for lending to a neighbour 


276 


THE SUPPLY OF CAPITAL 


what you could not use yourself was an obvious offense 
against reason and morals. All you were entitled to de¬ 
mand was security for its return when you needed it. What 
the borrower did with it was his concern, not yours! The 
doctrine of the Church, the paramount authority when 
Economics was a branch of Ethics, is excellently summarised 
as follows by Mr. Tawney. 1 “To take usury is contrary to 
Scripture; it is contrary to Aristotle; it is contrary to nature, 
for it is to live without labour; it is to sell time, which belongs 
to God, for the advantage of wicked men; it is to rob those 
who use the money lent, and to whom, since they make it 
profitable, the profits should belong; it is unjust in itself, for 
the benefit of the loan to the borrower cannot exceed the 
value of the principal sum lent him; it is in defiance of sound 
juristic principles, for when a loan of money is made, the 
property in the thing lent passes to the borrower, and why 
should the creditor demand payment from a man who is 
merely using what is now his own?” 

Economic historians have traced the interesting moral 
manoeuvres by which the rising needs of the mediaeval 
business world evaded the spiritual and legal condemna¬ 
tion of usury, the pleas of lucrum cessans, damnum emergens 
and the rest, until the organised demand from mercantile 
projects, on the one hand, and from the extravagance of 
rulers and courts for wars and other costly enterprises, on the 
other, gave a precarious status to financiers. But always 
there clung to these financial operations the element of 
‘squeeze’, the taking advantage of some emergency, enabling 
the lender more or less to dictate his terms. The money 
lender was thus always visualised as the one who ‘grinds the 
faces of the poor’. 

§ 2. The underlying element of truth in this early capital¬ 
ism still survives to some extent in the normal business 
processes of to-day. Though competition between capital- 
1 Religion and the Rise of Capitalism, p. 43. 


THE SUPPLY OF CAPITAL 


277 


i'sts greatly mitigates the harshness of the process, it still 
remains true that when a man with plenty of money is bar¬ 
gaining either for the goods or the services of another man 
with little or no money, the former is likely to get The better 
of the bargain’. Behind all wage-bargaining, individual or 
collective, lies the stern fact that it is more vitally urgent 
for the worker to sell his labour than for the ‘capitalist’ to 
buy it. 

It is needless to expatiate upon this familiar theme. But 
as the general attitude of mind of the workers towards those 
who wield the power of capital is an important factor in the 
moral reformation of industry, this initial feeling that 
‘capital’ is an oppressor must not be lost sight of. It can, 
indeed, only be eliminated by reforms in ‘capitalism’ itself, 
directed to put capital in its proper place, not as sole master 
and owner, not as an idle tax and task-master, but as a 
cooperant agent in an organic process, to be remunerated 
according to its needs. When Socialism represents itself as 
the enemy of Capitalism, this does not signify that socialists 
contemplate a state of industrial society that can dispense 
with capital, or with the processes which furnish it, though 
their prophets frequently ignore this issue. Indeed, it is 
quite evident that a completely socialistic society would have 
to make careful and exact provisions for the supply and ap¬ 
portionment among its several industries of a fund of capital 
adequate to meet anticipated needs of future consumption. 

The distinctively monetary aspect of saving and of capital 
investment often confuses the mind, even of economists, as 
to the substance of the proceeding. In its ‘substance’ saving 
does not mean either abstinence from spending or putting 
money in a bank, or buying stock. From the standpoint of 
the economic system saving means stimulating the produc¬ 
tive resources of industry to produce capital-goods, i.e., 
machinery, plant, power, raw materials, semi-manufactured 
goods, and reserve stocks of fully manufactured goods. The 


278 


THE SUPPLY OF CAPITAL 


productive resources of the community, so far as they are 
utilised, are engaged in serving three purposes. First, the 
production of consumable goods and services which are 
currently bought by consumers and applied to their per¬ 
sonal enjoyment; secondly, the maintenance of the various 
forms of concrete capital in their due proportions; and 
thirdly, the enlargement or improvement of these various 
forms of capital with a view to an increased volume of con¬ 
sumption. The entire real income of a community is applied 
in these three ways: consumption, replacement, enlarge¬ 
ment of capital; the monetary operations by which this is 
done are spending, replacement, and saving. In a given con¬ 
dition of the arts of industry a right proportion exists be¬ 
tween these three funds or activities as wholes, and a right 
apportionment among the different industries. Though the 
arts of production and consumption are intimately interact¬ 
ing, so that any changes in the modes of consumption will 
affect both the quantity and the quality of the capital and 
labour employed, while changes in production will sensibly 
affect both quantity and quality of consumption, the dis¬ 
cussion of this issue is conveniently deferred. At present it 
is best to confine ourselves to the consideration of the mo¬ 
tives and methods by which the necessary and desirable 
‘saving’ is conducted. 

§ 3. The present method of stimulating and applying 
savings is in its general outline familiar to all. The mone¬ 
tary saving fund, the surplus of the annual income after 
expenditure upon consumption and provision for deprecia¬ 
tion are accomplished, is provided, partly by corporate, 
partly by individual investment. Under corporate savings 
is included (1) capital outlays of revenue by governments, 
central and local, on productive services, whether of a re¬ 
munerative or a non-remunerative character; 1 (2) the 

1 A difficulty here arises where public capital, obtained by taxation 
or otherwise, is employed in producing goods or services which, like 


THE SUPPLY OF CAPITAL 


279 


accumulation by corporations and other businesses of undis¬ 
tributed profits in the shape of reserves. In Britain and in 
the United States, as indeed in all the most advanced indus¬ 
trial nations, this type of saving is the main source of new 
funds for the development of industry and trade. 1 

The essential importance of these forms of corporate sav¬ 
ing lies in the fact that a corporate policy is not actuated by 
the same motives, or directed to precisely the same objects, 
as private individual saving. This is manifest in the case of 
public capital, where the benefit of the community and not 
the future remunerative character of the investment is the 
guiding principle. But, even in the accumulations of re¬ 
serves by business corporations, a policy is pursued by the 
directorate which often differs from that which the indi¬ 
vidual shareholders would pursue, were they consulted, or 
exercised their individual control of the share of profits which 
‘belonged’ to them. The tendency of a prospering company is 
to put to reserves a larger share of profits than would be rep¬ 
resented by the individual savings out of enhanced dividends, 
had the profits been all paid to the shareholders. 

Individual savings take two forms. When a one-man or 
one-family business is carried on, the tendency is to put 
back into the business any excess of earnings over current 
personal expenses, allowance being made in good times for 
some improvement in standard of living. The small busi¬ 
ness man, farmer, trader, manufacturer, tries to improve his 
plant, increase his holding, enlarge his stock, and these im- 

free education or hygiene, are not market-values, and are not ac¬ 
counted part of the national income. It is, however, manifest that 
for any sane economic enquiry, the real economic income of a nation 
must not be considered to be reduced when a public free education 
displaces a private school system, and when public medical aid, 
through salaried officials, displaces private medical fees. 

1 Britain’s Industrial Future estimates that of the total national 
savings (including foreign as well as home investments) about two- 
fifths was provided in this way. The estimate for the United States 
is at a somewhat higher figure. 


280 


THE SUPPLY OF CAPITAL 


provements constitute his savings. Even when fairly care¬ 
ful books are kept, it is not easy to estimate with precision 
the amount of such saving, and among shop-keepers and 
other small traders bookkeeping that clearly distinguishes 
trading profits from wages of management is extremely rare. 
But as large corporate undertakings take an ever larger place 
in the economic system, individual savings for investment 
play an increasingly important part in furnishing capital for 
such expansions of existing enterprises as are not provided 
out of their reserves, and for launching new ventures. From 
the same source, individual investment, proceed also large 
sums deposited in banks which help to finance trading opera¬ 
tions, and still larger sums which are loaned to public bodies 
for their undertakings. This individual saving-fund flows 
into home or foreign enterprises, following in general the 
line of highest interest for least risk. 

§ 4. The part played by bank credit in the provision of 
capital needs special consideration. So far as the loans, 
overdrafts, or other provision for financing trade, are con¬ 
fined to lending moneys that represent the savings of 
depositors temporarily placed at the disposal of the banks, 
the procedure is quite simple. For these savings are part of 
personal incomes received in respect of productive services 
rendered by their recipients, or the productive fabric which 
they own. Since the saving process must be regarded as a 
continuous one, it signifies that a quantity of capital-goods 
is continuously produced as ‘real savings’ to correspond 
with the monetary saving that is going on. The true func¬ 
tion of the monetary saving is to secure liens upon the ‘real 
savings’ so as to utilise them for further production of wealth. 
The monetary savings will normally be directed to purchase 
those forms of the new capital which their owners desire to 
possess and use. These purchases of capital are usually 
performed by purchases of stocks and shares. But some of 
the monetary saving-fund does not thus directly attach itself 


THE SUPPLY OF CAPITAL 


281 


to capital goods, but is temporarily deposited in banks, 
awaiting some opportunity for profitable investment. 
While it is in the bank the bulk of it is available for short¬ 
term loans, or other advances, to traders. This means that 
the bank hands over to these traders the use of a portion of 
the real savings, the new capital-goods, for which the owners 
of the money-savings have no immediate use. The banks, 
in thus helping to finance trade, enable these traders to pur¬ 
chase materials and to supply consumable goods (food, 
clothing, etc.) to workers, which otherwise they could not 
have got possession of and utilised for furthering production. 
The point is that, in respect of these bank loans, real savings 
in the shape of capital goods exist and are made effective for 
production. 

But, when banks make advances to traders of credits not 
covered by the actual money owned by the banks, or depos¬ 
ited by consumers as savings from personal incomes, the 
procedure is less simple. This is the problem of bank-made 
credits. As they do not originate in incomes paid for pro¬ 
ductive services rendered, no capital-goods can be said to 
exist in respect of them. If, therefore, as is the case, they 
are utilised by the traders to whom the banks assign these 
credits, to get hold of supplies of materials and to hand over 
food and other goods to wage-earners, they can only effect 
this object by competing with the real saving fund for the 
purchase and utilisation of the new capital resources which 
the real saving public has made available. By increasing 
the quantity of money applied to the purchase of new capi¬ 
tal-goods, they exercise two influences. When the new 
capital-goods consist of raw materials, semi-manufactured 
goods, etc., the increased demand for them will raise their 
price and will withdraw some of them from the purchase 
and use of the Teal saving’ public to the purchase and use of 
those who receive and apply the bank credits. A second 
effect will be to raise the price of the stocks of foods and other 


282 


THE SUPPLY OF CAPITAL 


consumables, and by reducing the rate at which they would 
have been consumed by the normal expenditure of the 
moneys paid out in ordinary incomes, to hand over some of 
these stocks to be consumed by the workers in the businesses 
to which the bank credits were given. This is sometimes 
represented as causing these stocks of consumables to figure 
as additional capital, in the sense that the possession of the 
bank credits enables the recipient businesses to get them 
away from those who would otherwise have bought and 
consumed them, and to hand them over as ‘real wages’ to the 
additional workers whom they are enabled by the credit to 
employ. 1 

So, it is argued, the total volume of ‘savings’ is increased by 
an encroachment upon ‘spendings’: food, clothing, etc., which 
would have been bought for consumption out of incomes al¬ 
ready earned, are now bought out of wages paid to additional 
workers from the credits supplied by the banks. Whether 
this process, the substance of which consists in reducing the 
real wages, or incomes, of the rest of the community, in order 
to employ productively an otherwise idle body of workers, 
can rightly be termed ‘saving’ or ‘creation of capital’, is a 
nice matter of definition. This process is sometimes termed 
bank inflation and results in the transfer of ownership of 
real wealth from its producers to the banks who appear to 
have contributed nothing towards its production. This 
creation of purchasing power by banks is commonly ap¬ 
proved on two grounds, first, that it assists production by 

l Mr. D. Robertson has developed this thesis of the part played by 
bank credits in his Banking Policy and the Price Level. The thesis is 
thus conveniently summarized by Professor Marco Fenno in the 
Economic Journal, March, 1928 (page 126): “The banking system, in 
fact, expanding credit, increases the daily stream of money at the 
business men’s disposal, and empowering them to compete with the 
main daily stream of money for the daily stream of marketable goods, 
returns them a part of the latter, depriving the residue of the public of 
consumption which they would otherwise have enjoyed and engender¬ 
ing a general rise of prices.” 


THE SUPPLY OF CAPITAL 


283 


enabling certain productive plant and labour to function 
productively which without such credit must have stood idle; 
secondly, that by increasing the demand for and raising the 
prices of the capital-goods that represent real savings, it 
imparts a general activity to the trades producing these 
capital-goods and helps towards a revival of general trade. 
How far the stimulus thus imparted by bank-made money 
can usefully reinforce the stimulus and direction given by 
ordinary processes of saving, is an entangled problem which 
we here can hardly hope to solve. It must suffice to say that 
a prima facie moral case is repugnant to the supposition that 
it is socially advantageous that bank-made money, involving 
no real saving from income, should possess a power of pur¬ 
chase and a direction of production equivalent to that power 
and direction which emanate from the ownership of mone¬ 
tary savings invested in capital goods. 

§ 5. The most elaborate mechanism in the economic sys¬ 
tem is that which provides for the collection and distribution 
of the general investment fund. While many large flotations 
of stocks and shares in old and new enterprises are still 
effected by direct appeals of corporations to the investor, 
trust companies, banks, and general financiers play a grow¬ 
ing part as intermediaries in handling and apportioning to 
industry the flow of new capital available from individual 
investors. 

The whole of this apparatus of saving has its social eco¬ 
nomic significance in that it determines how much of the 
available productive power of the community shall be em¬ 
ployed in increasing the quantity and improving the quality 
of capital-goods in the various industries, and how much in 
placing increased quantities of consumable goods in the 
immediate possession of consumers. For only thus can we 
get a clear grasp of the cost and utility of saving, alike for 
the individual and the community. Eliminating such 
‘saving’ as is merely transfer of consuming power, in that it 


284 


THE SUPPLY OF CAPITAL 


is lent to other individuals to enlarge their personal expen¬ 
diture, or to repay previous excesses of expenditure over 
income, and keeping our eyes fixed upon Teal saving, viz., 
increases of capital, we perceive that such saving essentially 
consists in paying people to make non-consumables instead 
of consumables. To understand what happens, however, 
the time element must be studied. Producers of non-con¬ 
sumables, the capital-goods which represent the annual 
savings, do not wait for savers to set aside sums of money 
out of their incomes, in order to hand them over to companies 
in response to prospectuses, the companies then using these 
savings to order capital-goods to be made. The new capital- 
goods, the real social savings, are being continuously pro¬ 
duced in anticipation of the ‘demand’ for them when the 
money savings come to be applied. Or perhaps it would be 
more accurate to say, that the production of the new capital- 
goods proceeds concurrently with the setting aside of current 
personal income to make the money saving that will pur¬ 
chase them. An effective increase of the industrial system 
from the capital side requires the prevision and provision of 
three distinguishable sorts of capital, the new plant, the 
increased supplies of materials for the different productive 
processes, and a storing up of foods and other consumables 
to supply the initial needs of the fresh labour taken on to 
work with the new capital. The anticipation or calculation 
of the amount of new capital that will be required for these 
three uses in the various branches of production is the most 
delicate and difficult operation which a distinctively indi¬ 
vidualistic system is called upon to conduct. That immense 
skill, thought, and informed imagination, are put into this 
forecasting of capital requirements goes without saying. 
But it is also likely, or even certain, that great defects and 
waste occur in its performance, attributable, partly, to in¬ 
sufficient knowledge, partly, to the opportunities which the 
system affords to skilled performers of making money by 


THE SUPPLY OF CAPITAL 


285 


misrepresentation and other financial malpractice. Owing 
to these notorious defects the flow of new savings is not so 
fully utilised for furthering the increase of wealth as it might 
have been. Regarded from the social standpoint of human 
values, this system furnishes no sufficient guarantees for the 
social utility of new investments as distinct from their 
interest-earning capacity. Savings which go into financing 
American ‘boot-legging’, or into the supply of arms to some 
bellicose government, rank with savings that go into im¬ 
proved housing of the workers, or the irrigation of rich un¬ 
developed lands, each valued according to the rate of interest 
it fetches. 

§ 6. Here, once again, we are brought up against our 
root problem, the valuation of the ‘desired’ by the standard 
of the ‘desirable’. In the current method of providing new 
capital, by appeal to individual investors, there is no security 
that industry shall be run in accordance with the enlightened 
will of the community, so far as such a will exists. 

In fact it is precisely in this, the most intricate and essen¬ 
tially secret procedure of our economic system, that we might 
expect to find the widest divergencies between individual 
economic conduct and community needs or welfare. And 
we do find it. Not only is there no security for the best 
utilisation of savings and new capital, but there is no security 
that the right proportion of productive resources shall be 
applied to create new capital and to create consumables, or 
that the distribution of new capital beween the different 
employments shall be economically sound, in the sense of 
distribution according to needs. 

These defects in the saving process and the utilisation of 
new capital proceed from failures to make the economic costs 
and utilities of saving correspond with the equitable princi¬ 
ple of minimising human costs and maximising human 
utilities. This broad assertion, of course, needs justification 
from a closer enquiry into the incentives of individual saving. 


286 


THE SUPPLY OF CAPITAL 


A Crusoe, so far as he could assess his needs and forecast 
his fortune, would express his forecast in an accurate ad¬ 
justment between his labour given to each sort of production 
for immediate enjoyment, and his labour given to making 
tools, amassing materials, or preparing ground for making 
various improvements in his future standard of living. He 
would weigh closely present against future enjoyments, 
present costs or sacrifices against utilities. A conscious so¬ 
cialist community, if workable, would do the same, deliber¬ 
ately setting a given proportion of its labour to making new 
forms of capital instead of making more immediately con¬ 
sumable goods. It would do this successfully just in so far as 
it could forecast the future and provide for it. But success 
in doing this demands a conscious unity of plan and pur¬ 
pose. Now it is sometimes said that the money market 
constitutes such a unity of government, gathering financial 
resources where it can get them at lowest cost, and distribut¬ 
ing them where they will be most productive. And it is true 
that some conscious government is thus exercised. But it 
is a poor substitute for the centralised economy of a Crusoe, 
or of our conscious socialist community. For, apart from 
the fact that large masses of savings, corporate resources, 
and private business savings, do not come under this financial 
government, there is the far graver defect that harmony of 
interests does not exist between this financial government 
and the practical government of the units of industry. The 
apportionment of new capital, the free saving fund, is in the 
hands of the same financial institutions that control the 
operations of the markets for all existing securities. 

Although there is sometimes ascribed to them the fiction 
of a public trust, the utilisation of capital funds for the 
healthy development of the economic system, this ‘trust’ is 
only likely to be fulfilled in so far as the profits of financial 
operations accord with the best development of industry. 
For financiers, like other business men, are primarily out 


THE SUPPLY OF CAPITAL 


287 


for their own hands: their Trusteeship’ of the public interest, 
so far as it exists, is not a conscious motive and is merely 
incidental. There may be some dramatic exaggeration in 
Veblen’s picture 1 of the relations of the ‘price system’ to the 
practical conduct of business, but it is undeniably true that 
it may pay the financial control to limit productivity and 
raise, or maintain, prices, where the engineer, or manager, 
would expand business, reduce prices, and serve the consum¬ 
ing public. It would be foolish to maintain that there exists, 
or is likely to exist, among the men who control finance, a 
sense of public service, or trusteeship, strong enough to pre¬ 
vent them from preferring the profitable interests of them¬ 
selves and their clients to the interests of the general body of 
the people. 

§ 7. The absence of any conscious social direction in the 
accumulation and utilisation of capital is more largely 
responsible for the economic and human damages of cyclical 
trade fluctuations than any other cause. For the attempt to 
put into industry as a whole, or into certain parts of industry, 
a larger amount of capital-goods in the shape of plant, raw 
materials, etc., than are needed, and can find full regular 
employment in producing the quantity of consumable goods 
which can be and are marketed at remunerative prices, is 
the prime cause of the congestions and stoppages of industry 
which usher in periods of depression and unemployment. 
This ‘un’ or ‘under’ employment of capital and labour for 
considerable periods in most of the main industries, espe¬ 
cially in those engaged in producing fundamental and instru¬ 
mental goods, is simply a register of the excess of productive 
power of capital over the effective demands of the consuming 
public. 

Putting aside the subsidiary causes of inflated or deflated 
credits, of confidence and collapse of confidence in the minds 
of business men, which are the necessary consequences of 
1 Engineers and the Price System. 


288 


THE SUPPLY OF CAPITAL 


the real maladjustment between producing and consuming 
power, we come to the rock bottom of the situation. The fail¬ 
ure of consumers regularly to take out of the industrial 
system the full volume of consumable commodities it is able 
to supply, is admittedly due, in the first instance, to a defi¬ 
ciency of purchasing power in the hands of would-be con¬ 
sumers. The recognition of this obvious fact sets to work 
a host of money-spinning theorists, who want the State, or the 
banks, or somebody, to put out more money in periods of 
depression, and to see that it gets, if possible, into the hands 
of consumers. In truth, however, there is not at any time 
a lack of power to purchase all the commodities that are or 
can be produced. For at the various stages of their produc¬ 
tion there is distributed in wages, rents, interest, profits, 
and salaries, enough money to purchase all the goods for the 
production of which these ‘incomes’ are paid, if that money is 
regularly and without delay applied to purchase them. 
These ‘goods’ include not only consumable but capital 
goods, for, so far as employment goes, it makes no difference 
whether the ‘effective demand’ be for consumables or non¬ 
consumables. But, if there be any economic influence in¬ 
ducing the purchase of more capital-goods than are 
economically needed to produce the volume of consumable 
goods (reduced as it is by this very process of attempted 
over-saving), the over-production, stoppage, unemployment, 
shrinkage of incomes, which are the features of depression, 
become inevitable. In a given condition of the arts of in¬ 
dustry and of consumption there exists an economically right 
proportion between the share of the general income that can 
be spent and that which can be saved. A certain proportion 
can advantageously be applied to capital in order to provide 
against increased future consumption. But the common 
notion that, because any individual can save any proportion 
of his income he chooses, a whole economic society can do the 
same, is a manifest delusion. An economic society may un- 


THE SUPPLY OF CAPITAL 


289 


der-save, in the sense that it does not provide enough new 
capital to supply the increased quantity of commodities 
which could have passed into consumption, had they been 
produced. It may over-save by providing so much new 
capital that it cannot function fully in turning out com¬ 
modities for which there is a market. With a proper adjust¬ 
ment between spending and saving every enlargement of 
supply would be taken off in demand at a price which would 
maintain the full current of supply. 

No juggling with credit can cure the maladjustment which 
periodically chokes the channels of industry and stops pro¬ 
duction. 1 

This waste, like other economic maladies, is due to mal¬ 
distribution of productive costs and consumptive utilities. 
It arises directly from a failure of the economic system to 
put a sufficient proportion of the general income, or pur¬ 
chasing power, into the hands of those who would use it in 
demanding consumables, and too large a proportion into the 
hands of those who, after supplying all their urgent or con¬ 
ventional needs, have a large margin for purchasing capital 
goods. 

§ 8. But it will rightly be urged, that as long as the saving 
classes apply their savings to buy capital goods, there is no 
check to production and employment. This is true, and the 
first stage of over-saving does not exhibit waste. But, when 
it becomes evident to business men that the quantity of new 
capital-goods put into existence and productive use is in 
excess of that required for supplying all available markets, 

1 1 do not intend to signify that it is a matter of social indifference 
how much money exists, or that it is undesirable to attempt by mone¬ 
tary regulations to stop violent fluctuation in general prices. Suffi¬ 
cient steadiness in the general price level, so that persons contracting 
for future sales or purchases, or otherwise making provisions for an 
economic future, may make safe estimates, is an evident prerequisite 
of a smoothly working economic system. This issue receives fuller 
treatment in its proper place, i. e., chapter IX. 


290 


THE SUPPLY OF CAPITAL 


the visible evidence of this excess checks the further appli¬ 
cation of monetary savings to the actual purchase and opera¬ 
tion of the capital-goods produced in anticipation of inves¬ 
tors’ demands. ‘Savings’ then lie idle waiting for likely 
investments, while the capital-goods they were ‘intended’ to 
buy also lie stored up and waiting purchasers, or else are not 
brought into concrete existence, by the plant and labour 
ready to produce them, because of a fall-off in orders. There 
is no large over-production of consumers’ goods: the big 
blockage and stoppage of production are thrown back on the 
trades producing machinery and other capital-goods, which, 
if they were produced, could not function profitably in in¬ 
creasing the supplies of consumables. At no time, indeed, is 
the damage at all adequately represented in stocks of unsale¬ 
able goods: the damage is in the idleness of the machinery 
of production. 

The commonly accepted economic theory is that a right 
proportion between saving and spending is maintained by 
means of the rate of interest. Interest is the price paid for 
saving, and the way to stimulate an increase of the supply 
of any sort of goods or services is to raise its price, the way to 
depress the supply is to reduce its price. But this prime in¬ 
centive is less applicable to the provision of capital than to 
any other service. There are several reasons for this. The 
prices for almost all other goods or services are payments of 
a lump sum on delivery of the goods, or soon after. Interest, 
the price of savings, is paid in a number of instalments over 
a long period of time, during which changes in the purchas¬ 
ing power of money may raise or lower indefinitely the real 
reward of saving. 1 This insecurity of price, is, of course, 
not confined to fixed-interest securities, but applies to all 

1 As Professor Irving Fisher so ably demonstrates, while the fall 
of prices between 1875 and 1895 increased the payment made to holders 
of fixed-interest securities bought in the earlier year, the rise of 
prices between 1895 and 1914 wiped out the greater part of the value 
of savings of 1895 invested in that order of securities. 


THE SUPPLY OF CAPITAL 


291 


investments, a heavy risk-element peculiar to this market, 
and interfering generally with the normal play of the price 
incentive. 

But a still greater interference with rate of interest as 
regulator of supply of capital is the diversity of sources of 
supply, to which allusion has already been made. The con¬ 
siderable proportion of new capital raised by public bodies, 
not from the investment market, but from taxation, is not 
answerable to any rate-of-interest regulation. Nor is the 
much larger quantity of capital raised by building up reserves 
much affected by consideration of the current rate of interest, 
though to some extent the amounts put to reserve will be af¬ 
fected by the influence of the current bank-rate on the prof¬ 
its of the business, and by considerations of the possibility 
of raising new capital by debentures or fixed-interest shares 
at a higher or lower rate. It is only when we come to indi¬ 
vidual saving and investment that we can expect a rise or 
fall of current rate of interest to exercise some direct control. 
But does a rise in the rate of interest operate regularly and 
proportionately as a stimulus to individual saving? We 
have seen that most individual saving is the almost automatic 
accumulation of the surplus element of large incomes, after 
the desire for personal expenditure was satisfied. Such 
saving will not be much affected by any raising or lowering 
of rate of interest. Doubtless there are well-to-do persons, 
ambitious to become rich quickly, who will seize the oppor¬ 
tunity of high interest, as an index of high dividends, to 
strain their saving power. But it cannot be said that the 
large savings of the rich ever tend to respond with any de¬ 
gree of exactness to the rate of interest. When we turn to 
men of modest means, wont to exercise some personal thrift 
in order to make provision for a future income from their 
savings in view of retirement, old age, a breakdown in health, 
and a decent provision for their family, or even to rise to a 
higher standard of current expenditure in the near future, 


292 


THE SUPPLY OF CAPITAL 


we shall expect to find some considerable response in rate of 
saving to the rate of interest. Among most men in this sit¬ 
uation, when interest is higher, there will be a push to in¬ 
crease savings, so as to attain the desired object earlier and 
easier, so far as that object is a clearly envisaged future in¬ 
come. But most of them will be unable or unwilling to make 
any reduction of established expenditure in order to seize 
advantage of the higher price for saving. They will be con¬ 
tent with the prospect that their usual rate of saving will 
bring them in a larger payment. In some cases, indeed, 
convinced that they have been saving at a sufficient pace be¬ 
fore, the higher interest might cause them to reduce the 
amount of savings, on the calculation that a smaller amount 
is in its yield now equivalent to a larger amount at a lower 
rate of interest. Where, as among large classes of more 
ambitious workers, savings for provision against emergencies 
are always competing, closely and concisely, with expendi¬ 
ture for a rising standard of life, it will largely depend on 
individual temperament and particular personal situations 
whether the effect of a rising rate of interest will be to in¬ 
crease or decrease savings. When the saving process is 
closely envisaged as an attempt to make a definite amount 
of future provision against old age, disablement, or other 
anticipated emergency, a lowering of the rate of interest may' 
stimulate a larger instead of a smaller rate of saving, if the 
future needs are to be met out of the interest on the invested 
capital. On the other hand, if the provision for the future is 
by way of the expenditure of the capital sum saved, and 
not by the expenditure of its interest, the higher rate of inter¬ 
est will have little effect on current rate of saving, except so 
far as the saver realises that, by letting his savings accumu¬ 
late at compound interest, he can attain his goal earlier. 
This analysis serves to show how exceedingly unreliable the 
rate of interest is as a regulator of supply of new capital: 
over larger sources of supply it can hardly be said to operate 


THE SUPPLY OF CAPITAL 


293 


with any clearness of direction, and over the smaller sources 
its influence is dubious. 

§ 9. No guarantee, evidently, is provided by this price 
system for the evocation of a saving fund adjusted with even 
moderate accuracy to the economic requirements of the in¬ 
dustrial system. I have already urged that in the periodic 
over-production and depression of the chief industries we 
have an indication of a tendency to try to save and invest 
more than can be assimilated and converted into effectual 
productivity. There is a prima jade case for holding that if 
in normal times a larger proportion of the general income 
were spent and a smaller proportion saved, production as a 
whole would be maintained upon a higher level, and that the 
actual amount of saving over a period of time would be 
larger than it is, though forming a smaller proportion of the 
enhanced income which would emerge from the fuller pro¬ 
ductivity of the economic system. 

Now this tendency to attempt to save and create new capi¬ 
tal at a faster rate than it can be assimilated must in some 
measure be attributed to the wide inequalities in the distribu¬ 
tion of the general income, or in other words, to the power of 
certain factors of production to extract payments that are 
in excess of what is economically necessary to evoke their 
use. We get back, in other words, to our old source of eco¬ 
nomic evil, the unearned surplus, the causa causans of discord 
and of waste. The chief economic waste, indeed, is ex¬ 
pressed with some exactitude of measurement in the volume 
of un-employment and under-employment. 

§ 10. Assuming the validity of this analysis, it is to greater 
equality and equity of distribution that we must look for 
an arrangement of incentive that will give a better adjust¬ 
ment between saving and spending, providing and appor¬ 
tioning the economically serviceable quantities of capital. 
Economists are in general agreement that inequality in dis¬ 
tribution of the general income is favourable to saving, in 


294 


THE SUPPLY OF CAPITAL 


as much as the rich can and do save a larger proportion of 
their incomes than the poor. This agreement disposes some 
of them to fear any movement towards levelling incomes, 
on the ground that its check on saving would retard industrial 
development . 1 In effect they rely for industrial progress 

1 Living at a time and in a country where the expansion of markets, 
domestic and foreign, found profitable use for all the capital that was 
forthcoming, the early classical economists in Britain built their theory 
of production upon the assumption, first, that no limit existed to the 
proportion of the general income which could be put to the enlarge¬ 
ment of capital, and, secondly, that high profits were doubly favour¬ 
able to this saving process. For as McCulloch pointed out, “Experi¬ 
ence shows that while high profits afford greater means of saving, they, 
at the same time, give additional force to the parsimonious principle’' 
(Principles of Political Economy, p. 110). This doctrine was devel¬ 
oped by J. S. Mill into the thesis that a “demand for commodities is 
not a demand for labour”, i. e., that saving directly causes as much 
employment as spending, and indirectly builds up a larger wage-fund, 
so causing an increasing volume of employment. 

Though the ‘wage-fund’ doctrine was dropped later on, the impli¬ 
cation of unlimited saving, coupled with the belief that high profits 
favoured saving, continued to furnish a stubborn defence of unre¬ 
stricted profiteering. For the high profits, saved and put back into 
business, enlarged productivity, reduced prices, and benefitted the 
consumer. Such was the naive reasoning of the mid-century. 

But it is remarkable to find that British economists still hold that 
‘unequal’ and ‘inequitable’ distribution is essential to industrial prog¬ 
ress. Here is Mr. Keynes saying that “the immense accumulations 
of fixed capital, which to the great benefit of mankind, were built up 
during the half-century before the war, could never have come about 
in a society where wealth was divided equitably” ( The Economic 
Consequences of the Peace, p. 19). Though Sir W. Beveridge does 
not go so far in his defense of inequality, his thinking ranges along the 
same line. “If incomes were so far equalised that all saving meant 
sacrifice of a keenly desired present good for a future one, it is ex¬ 
tremely likely that no sufficient provision for new capital would be 
made at all” (i. e., Crusoe would not save!) ( Unemployment, p. 63). A 
similar fear of under-saving as the result of equalisation of income 
permeates Sir J. Stamp’s analysis of the results of a capital levy 
(Principles of Taxation, p. 164). 

But perhaps the most instructive pronouncement is that of Dr. 
Cannan. “The economist regards the existing inequality of distribu¬ 
tion as in itself extremely wasteful, but sees that it must in the main 
be retained for the present, because it provides both the motive 
force and the regulator for the existing system of production; and, 


THE SUPPLY OF CAPITAL 


295 


upon this very ‘surplus’ which I have indicated as the chief 
source of economic discord and w r aste, for only out of this 
surplus can society get the ample supply of new capital that 
is needed. 

If it were, indeed, true that a more equal and equitable 
distribution of income was detrimental to progress, in that it 
starved the economic system, we should be landed in a moral 
impasse. But if, as experience attests, the present unequal 
distribution results in an attempt to create more new capital 
than can actually function for productive purposes, we have 
good grounds for holding that a more equitable distribution 
would be also more conducive to feeding the economic sys¬ 
tem with that supply of capital which it can best digest, so 
maintaining production at its highest level. 

The view that economic progress depends for its success 
upon the endowment of favoured classes and individuals with 
rents, profits, dividends, and other gains, which are in large 
measure not the result of any skill or energy on the part of 
their recipients, but the results of natural or contrived scarci¬ 
ties of supply is indeed a view as repugnant to reason as it is 
to morals. It is not seriously arguable that an economic 
community, moving towards greater equality of income and 
of standards of living, would suffer from an insufficiency of 
capital to develop the improvements of technique which the 
applied sciences are continually discovering. It is surely 
reasonable to hold that the greater security of livelihood 
upon a higher level, with the improved intelligence and 
foresight which these conditions would entail, would both 
enable and stimulate a far larger contribution to the saving 
fund to be made by the general body of the workers, so far 
as that fund depended upon personal thrift. If, as is prob- 

even were it practicable, it would not be worth while to make and 
introduce the ideal of distribution, if it led to a considerable fall in 
produce per head. The existing inequality, regarded broadly, is in 
fact a necessary evil” (The Economic Outlook, p. 252). 


296 


THE SUPPLY OF CAPITAL 


able, an increasing share of new capital will be provided out 
of public revenues, state or municipal, raised from taxation 
upon ‘surplus’ elements of income, there is no ground for 
supposing that it is necessary to leave such surpluses in pri¬ 
vate hands in order to get their contribution to the saving 
fund. 

If, therefore, as we have argued, both moral and economic 
principles demand that this ‘irrational surplus’ should be 
absorbed, partly in higher wages, partly in public revenue, 
there is every ground for maintaining that such processes of 
economic equity would be attended by a better adjustment 
of the proportions of spending and saving in the aggregate in¬ 
come. It will, doubtless, be objected that experience shows 
that governmental bodies make a more wasteful use of any 
capital which they employ than do private capitalists. This 
topic we have already touched, pointing out that some of the 
charges of waste and business incompetence attributed to 
public enterprises arise from misconceptions of the different 
meanings of ‘economy’ as employed by a profit-seeking 
business and a public service. If the former pays anything 
above the bare wage of efficiency, or fails to extract the ut¬ 
most toll of labour from the workers it employs, this is bad 
business economy. But a public service may well adopt a 
more humane standard, realising that it may not be sound 
social policy to pay the lowest market wage, or to pursue a 
driving policy which wears out the worker prematurely and 
makes him a burden on some other department of the public 
service. 

§ 11. There is, however, another and not less important 
aspect of investment that deserves consideration. The hu¬ 
man waste of our present saving and investment system is 
not confined to the quantitative maladjustment upon which 
we have dwelt. Apart from the well-known processes of wild 
speculation and of actual fraud, which the ignorance of in¬ 
vestors enables less scrupulous financiers to pursue, the whole 


THE SUPPLY OF CAPITAL 


297 


system of investment of capital is uneconomical from the 
human or social standpoint. New capital is apportioned 
among various employments in accordance with the early 
estimated profitability of the several enterprises, and with¬ 
out regard either to the general and long-view estimate of 
national or world productivity, or to the human worth of the 
goods or services which the capital assists to produce. En¬ 
terprises of great but slow maturing value, e.g., many affores¬ 
tation or irrigation or other developmental projects, cannot 
get from any private sources the capital which they require, 
while rum-running or greyhound racing can absorb out of 
the general saving-fund as much capital as their promoters 
wish. The proportion of home investment to foreign invest¬ 
ment may be a matter of profound social importance for the 
future economic strength of a nation, while the uses made of 
exported capital, e.g., for railroads, for civic display, for 
armaments, for court extravagances, may be fraught with 
widely different reactions, economic and human, both upon 
the countries which receive the capital and those which fur¬ 
nish it. In a word, the normal current policy which allows 
the free investment fund to be distributed entirely on private 
calculations of an early yield of profits has no claim to be 
a sound social or even a safe economic policy. The notion 
that astute financiers, playing upon the appetite of a neces¬ 
sarily ignorant and credulous public of investors, can be 
relied upon to put the fund of savings to its best economic 
or human uses, is quite untenable. The best that can be 
said for it is that, failing any other more responsible 
guidance, it will tend to distribute the savings according 
to its best short-range profitability, and that, as profits 
generally accord with economic utilities, the saving fund 
will therefore tend to flow into useful channels. This, 
of course, is a remnant of the doctrine of ‘natural har¬ 
mony’ and ‘unseen hand’, the individualist philosophy 
whose deficiencies have been already disclosed. Our argu- 


298 


THE SUPPLY OF CAPITAL 


ment has been that the conditions which gave apparent val¬ 
idity to this principle, the knowledge, free choice, and 
mobility, have never been achieved, and that, so far as cap¬ 
ital is concerned, there is no ground for holding that either 
the intelligent wits of individual investors, or the gainful 
calculations of financiers, are a reliable guarantee for the 
best use of savings. But a more rational distribution of the 
general income, in which the ‘surplus’ was absorbed, partly, 
in raising workers’ incomes up to a level of economic and 
human efficiency, partly, in the enlargement of public serv¬ 
ices and community life, would undoubtedly bring great 
economies in the utilisation of capital. It would, by in¬ 
creasing and regularising the effective demand for standard 
commodities and services, absorb a larger proportion of 
capital in those industries which can best exploit the eco¬ 
nomies of capitalist production. By reducing the volume of 
capital and labour employed in the luxury trades, which are 
most subject to the whims and freaks of taste and fashion, 
it would give more security to employment, and force new 
capital into more socially useful investments. So far as in¬ 
dividual saving continued to be a chief or an important 
source of new capital, the policy of distribution according 
to capacity for use should take into account the obligation 
of all members of the community to make due provision for 
future contingencies which lie outside the growing area of 
communal provisions. The family income, in other words, 
should be adequate, not only to furnish the current require¬ 
ments, but to leave a margin for personal thrift. The better 
distribution of income which we envisage would for the first 
time give a rational foundation to the practice of that virtue 
which has figured so prominently in the narrow ethics of 
political economists. Hitherto the preaching of thrift, as a 
supreme duty of every man to himself and to society, has 
always carried a taint of insincerity. For, if applied to the 
conduct of the rich, whose savings involved no self-sacrifice, 


THE SUPPLY OF CAPITAL 


299 


it was unmeaning and irrelevant. As applied to the poor, 
it was often a doctrine of false economy. For a prime duty 
of the worker is to secure an efficient standard of current 
consumption for himself and his family. Not until that is 
attained, can any obligation to provide for remote contin¬ 
gencies arise. Moreover, the narrow significance given to 
the term ‘thrift’ has injuriously affected the whole conception 
of ‘economy’. Properly regarded, thrift should signify the 
best employment of the economic resources of an individual 
or a community. For personal life, it will mean the best ap¬ 
plication of one’s powers and the best use of one’s income. 
In this latter application, it will signify the proportionate 
application of an income so as to get the most out of it. 
Proper food, clothing, housing, and other material necessaries, 
will come first, then expenditure on health, education, and 
other provisions for the lasting welfare of the family. These 
needs take precedence of saving for investment, even to meet 
future emergencies which are certain. It was an excessive 
assertion of a distinctively bourgeois economy, in league with 
primitive asceticism, that gave to saving the high place it 
occupies in the hierarchy of economic virtues. Man 
‘thrives’ by right spending in the first instance, and then by 
a right direction of such income as he can afford to save. 

Saving, unlimited and undirected, may, as we perceive, do 
more harm than good to the saver and to the society of which 
he is a member. In the individual it may feed avarice, ti¬ 
midity, and love of power, while it may subject society to 
those wild congestions and wastes of productive power to 
which attention has been called above. If a better distribu¬ 
tion of personal income would, as we contend, furnish what 
may be called a ‘nature cure’ for some of these maladies, it 
could not, however, do all that is required to place the whole 
body of savings in their most serviceable channels. As the 
economy of community life gains more recognition, increased 
capital provision must be made for slow maturing future 


300 


THE SUPPLY OF CAPITAL 


public services and public enjoyments. “The joys that are 
in widest communalty spread” do not come into being spon¬ 
taneously, and without prevision and provision from the 
resources of the past. Such provision, so far as it rests upon 
economic foundations, cannot be made out of individual 
foresight and saving. It belongs in its sources, as in its 
achievements, to communal activity. Group life, as we per¬ 
ceive it, cannot be resolved into a number of individual econ¬ 
omies, but has collective activities and responsibilites, 
which, so far as they impinge on economic life, must have 
economic incomes at their command. This conception of a 
nation or a city having a right to a share of the general in¬ 
come, in virtue of the services it renders to the production of 
wealth, and having, therefore, an obligation to make the best 
public use of its income by the performance of communal, 
or non-remunerative services, though extending far beyond 
the subject which immediately engages our attention, has a 
definite bearing upon the utilisation of those savings that are 
the progress fund of the future. For if, as we see, there 
exist important developmental services, which in their nature 
can make no secure or adequate appeal to the current inter¬ 
ests of individual savers, they form a proper field for the 
application of those unearned surpluses which are rightly 
claimed as public revenue. 


CHAPTER V 


STANDARDS OF CONSUMPTION 

§ 1. Adam Smith declared that “Consumption is the sole 
end and purpose of all production, and the interest of the 
producer ought to be attended to only so far as it may be 
necessary for promoting that of the consumer.” This ex¬ 
treme statement of the subordination of the producer to the 
consumer might have led to the expectation that economists 
would have placed the conscious interests and the art of 
consumption in the forefront of their science. But a survey 
of economic literature shows that the recognition given to 
consumption is almost wholly formal, and that little serious 
attempt has yet been made to bring consumption into the 
economic system as an integral part. 

It is worth while enquiring into the causes of this neglect. 
The proportion of the time and energies of man devoted to 
productive processes, and the organisation of those processes 
into a single economic system through the process of ex¬ 
change, present the unity of a business world that seems 
self-sufficing. Merchants, manufacturers, bankers, agricul¬ 
turalists, compelled to extend their thoughts from their 
particular employments so as to envisage industry or com¬ 
merce as a whole, engaged the attention of statesmen, publi¬ 
cists, and theorists, to help them in furthering these wider 
interests. Though everybody agreed that consumption was 
the final goal, this goal, as such, was nobody’s concern. 
When goods passed through the hands of farmers, manu¬ 
facturers, and traders, into the hands of consumers, they 

301 


302 


STANDARDS OF CONSUMPTION 


seemed to pass out of ‘the economic system’ into a destruc¬ 
tive process that took place in privacy and obscurity. When 
goods passed over the retail counter, they ceased to be 
economic entities. 

This statement, however, needs one important qualifica¬ 
tion. Economists were concerned with consumption just 
in so far as it counted towards production. That is to say, 
they developed the distinction between productive and un¬ 
productive consumption, the former coming within their eco¬ 
nomic survey as a process necessary for the maintenance of 
human productive energy. Upon this score the early econo¬ 
mists are sometimes misrepresented as inhuman monsters, 
wilfully subordinating the whole life of a man to material 
money-making ends, and condemning all comfort and lux¬ 
ury as waste. This is not their real position. Most of them 
were favourable to a production and distribution of income 
that enabled the workers to live in comfort and to spend 
‘unproductively’. J. S. Mill observes, “It will be a great er¬ 
ror to regret the large proportion of the annual produce 
which in an opulent country goes to supply unproductive 
consumption. It would be to lament that the community 
has so much to spare from its necessities for its pleasures and 
for its higher uses. This portion of the produce is the fund 
from which all the wants of the commtfnity, other than those 
of mere living, are provided for: the measure of its means of 
enjoyment and of its power of accomplishing all purposes 
not productive.” 1 

But all the same this ‘unproductive consumption’, though 
vitally valuable, remained outside the consideration of 
economists. While consumption remained the formal end 
of economic processes, production was the real end, pro¬ 
ductive consumption alone coming within the economic 
sphere. This exclusion of consumption, as such, was sup¬ 
ported by two other attitudes of early economic theory. The 
1 Principles, Bk. I., chap. Ill, § 6. 


STANDARDS OF CONSUMPTION 


303 


use of the term ‘consumption’ to describe the wear and tear 
of plant and the utilisation of raw materials and semi-manu¬ 
factured goods in productive processes helped to confuse the 
terminology of economic theory. There is nothing in com¬ 
mon in the process of converting cotton yarn into cotton¬ 
sheeting and the process of wearing out cotton-clothing, and 
yet the term ‘consumption’ is applied indifferently to both. 
But a still stouter barrier, set up by early economic thinkers 
against the admission of consumption, was the universal 
adoption of the cost theory of value. ‘Value’ being the 
central abstraction of the economic system, the treatment of 
its determination by considerations lying entirely within the 
productive processes made it unnecessary to bring under 
survey the process of consumption. 

§ 2. Not until Gossen, followed by the Austrian econo¬ 
mists, with Jevons in England, turned the tables on the ‘cost’ 
economists, by developing the ‘final utility’ theory of value, 
was it possible to get any organised attention for consump¬ 
tion. 1 When these thinkers made human wants the key to 
economic processes, the art of consumption could no longer 
be denied its proper place in the science of economics. So, at 
least, it might have been supposed. Jevons, indeed, expli¬ 
citly demanded the place of honour in the science for con¬ 
sumption. “Economics must be founded upon a full and 
accurate investigation of the conditions of utility; and to 
understand this element, we must necessarily examine the 
wants and desires of man. We first of all need a theory of 
the consumption of wealth.” 2 Yet in the half-century that 
has transpired since these words were written, no such 
‘theory’ has emerged. Writing some two years later, F. A. 
Walker expressed his concern at the deficiency. “We need,” 
he wrote, “a new Adam Smith, or another Hume, to write the 

1 Cf. L. H. Haney, History of Economic Thought, chap. XXVIII, 
for early developments of the ‘utility’ theory. 

2 Theory of Political Economy, p. 42. 


304 


STANDARDS OF CONSUMPTION 


economics of consumption in which would be found the real 
Dynamics of Wealth; to trace to their effects upon produc¬ 
tion the forces that are set in motion by the uses made of 
wealth; to show how certain forms of consumption clear the 
mind, strengthen the hand, and elevate the aims of the in¬ 
dividual economic agent, while promoting that social order 
and material confidence which are favourable conditions for 
the complete development and harmonious action of the in¬ 
dustrial system; how other forms of consumption debase and 
debauch man as an economic agent and introduce disorder 
and waste into the complicated mechanism of the produc¬ 
tive agencies.” 1 

Though this is in effect only a plea for a discriminative 
study of productive consumption, it furnishes a striking 
testimony to the failure of economists after several genera¬ 
tions of scientific study to make any substantial progress 
along the path indicated so clearly by Adam Smith. 

It would, however, be wrong to disparage the progress that 
has actually been made by economists and social investiga¬ 
tors in the field of consumption. The pursuit of ‘utility’ 
into consumers’ desires and conduct, with the bearings of 
these pressures upon elasticities of demand, has played a part 
of increasing importance in modern economic theory. Al¬ 
fred Marshall’s presentation of the problem of price, or 
market value, in terms of interacting supply and demand 
curves that reflect equally the pressures from the side of 
‘scarcity’ and of utility, brought him and many of his fol¬ 
lowers into a closer consideration of consumption than had 
hitherto been made. 

But a study primarily directed to the ascertainment and 
measurement of elasticity of demand, does not yet accord 
the disinterested valuation of consumptive processes required 
by a theory in which consumption is the ‘sole end’. For 
consumption here only enters the economic field as a factor 
1 Political Economy, p. 317. 


STANDARDS OF CONSUMPTION 


305 


in markets and the determination of prices, not as the means 
of realising the purpose to which the whole economic system 
is directed. These investigations of utilities have, however, 
insensibly sapped the older barriers of an economic study in 
which productivity was the be-all and end-all. Economic 
welfare through consumers’ satisfactions has come to figure 
more distinctly as an object of consideration. But, though, 
since Marshall in the section of his great work, entitled ‘Our 
Wants and Their Satisfaction’, restored consumption to its 
place in the theory of economics, later economists have 
shown some disposition to consider the importance of the 
study of ‘elasticity’ in the various items of consumption, 
and to take some account of the interactions between pro¬ 
duction, distribution, and consumption, 1 it cannot be said 
that any adequate study either of the evolution of actual 
standards of consumption, or of ‘desirable’ standards, has yet 
been made. This is due, partly, to the inherent difficulties 
attending such a study, partly, to a failure to realise ade¬ 
quately that the organic nature of man necessarily stamps 
itself on his standard of consumption, and that, therefore, 
the various items of consumption must be studied as con¬ 
tributions towards this organic whole. Though much atten¬ 
tion has been given to the economy of expenditure in equalis¬ 
ing ‘marginal utilities’, it has not been clearly recognised 
that the several margins are themselves determined by proc¬ 
esses of utilitarian calculation based on balances of organic 
requirements. While economists have devoted much 
thought and study to discussing the elasticity of demand for 
wheat, or cotton goods, or wines in different classes of con¬ 
sumers, and in relation to other substitutional goods, they 
have seldom based their studies upon an examination of the 

1 See, for example, passages in Pigou’s Economics of Welfare, on 
distribution of income as affecting the nature of production and con¬ 
sumption (57, note), security of income as a condition of economic 
welfare from consumption (67), leisure and education as enabling 
people to get more utility out of the same goods (70). 


306 


STANDARDS OF CONSUMPTION 


organic structure of a standard of consumption. Not that 
the interdependency of different articles of consumption has 
been ignored. Complementary, subsidiary, and substitu¬ 
tional goods have become recognised categories in the study 
of the demand side of the price equation. The Austrian 
utility economists in particular, from Gossen, the German 
founder, to Menger, Bohm-Bawerk and the more recent mem¬ 
bers of this school, have, in studying the psychology of needs, 
shown considerable skill in relating utilities as disclosed 
through demand, to the relative importance of human needs. 
But, though some recognition of the organic problem is here 
accorded, its significance is nowhere faced. The American 
economist, S. N. Patten, is entitled to the credit of the first 
serious attempt to work out a treatment of economics in 
terms of the organic interaction between the arts of produc¬ 
tion and of consumption. His endeavor to trace and ex¬ 
pand harmonies and disharmonies in food consumption, and 
to relate them on the one hand to biological requirements, 
on the other to physical and social environment, was pioneer 
work of the highest value. Though some of his valuations 
were highly disputable, and his biology somewhat fanciful, 
the rightness of his methods, and his courage in pursuing them 
will secure for him an important place in economic thought. 

§ 3. It may, however, be contended, as a partial defence 
of the slowness of economists in exploring this field, that they 
await the further results of two sorts of investigation into 
the problem of consumption. Though Eden, Young, and 
other economic historians of the eighteenth century, began a 
process of enquiry into working-class consumption which 
in recent times has developed, in England, America, France, 
and elsewhere, into statistical analyses of graded budgets 
on different income levels in different classes, much still re¬ 
mains to be done before we can get a census of consumption 
comparable in volume of information and degree of relia¬ 
bility with the best modern census of production. Yet such 


STANDARDS OF CONSUMPTION 


307 


is what we need, if we are to get a true picture and estimate 
of the volume of consumer’s utility or satisfaction issuing 
from the producer’s activities in the various processes of 
production. Only by such careful tabulation of statistical 
information upon the expenditure side can we build up the 
various standards of consumption which measure and 
express the actual desires of the people for economic goods, 
and relate these standards to the environmental, cultural, 
occupational, and other conditions that vitally affect con¬ 
sumption. 

In such a census the unit of enquiry is the family, as the 
unit in a census of production is the business, the bachelor 
family corresponding to the one-man business. Taking the 
family as a self-contained consuming structure, its composi¬ 
tion must be studied in regard to the number, age, sex, occu¬ 
pation, income, residence of its members, as a basis for the 
interpretation of the family budget in its essential items. 
In any classification of items of consumption the most serv¬ 
iceable approach lies in the distinction between custom or 
convention and personal choice. The individual and family 
expenditure of almost all people, and for almost all purposes, 
is determined mainly by the custom of the country, class, or 
neighbourhood. This applies to the food, clothes, housing, 
furniture, and other physical requisites of life, consumed 
in private within the home, as much as or more than, to the 
expenditure on appearance, luxury, and enjoyments, where 
public opinion is directly operative. For though it is true 
that biological needs and physical environment must be 
regarded as ultimate determinants in the former group, this 
determination is imposed by long tradition and hard con¬ 
vention upon each fresh generation. Man, like other ani¬ 
mals, is most conservative in his feeding habits, and though 
new and foreign articles of diet may be grafted on to the 
customary diet, the process is generally slow and disturbing, 
as the story of the introduction of tea, alcohol, and tobacco 


308 


STANDARDS OF CONSUMPTION 


into countries where these articles were previously unknown, 
will serve to indicate. 

§ 4. Dr. Patten justly emphasised the importance of a 
liberal experimentalism in diet to the progress of a people. 
“That the standard of life depends on the regularity and 
variety of food supply, cannot receive too much emphasis. 
The increase in the quantity of the commodities produced 
does not raise the standard of life unless there is an increase 
in the variety consumed.” 1 Indeed, from the standpoint 
both of supply and demand, variety and regularity are inti¬ 
mately connected. The dependence of a local population 
upon a single crop is notoriously a perilous situation, as Ire¬ 
land learned in 1848 and Egypt from the earliest times. To 
accommodate the organic needs of human life to the apti¬ 
tudes of the physical environment is, indeed, the basic prob¬ 
lem of economy. And the successful solution of this problem 
depends upon the adaptability of man, the acquisition and 
cultivation of a sufficient liking for variety, a qualitative 
instead of a purely quantitive appetite. Though a country 
may be upon the whole best adapted to grow some single 
crop, such as rice or wheat, there will be qualities of soil or 
situation suitable for other crops which are wasted if only 
rice or wheat is wanted. Since there is less likelihood of the 
simultaneous failure of several crops than of any one, it is 
evident that this policy makes in the long run both for a 
larger and a more regular food-supply. On the side of de¬ 
mand, or consumption, the economy is still more evident. A 
‘verdammte Bedurfnislosigkeit’ is the barrier to all progress. 
A divine discontent first exhibits itself in a craving of the 
appetite for foods that are new and interesting, for clothing 
and personal decorations that give distinction, for tools 
with which we can do things we could not do before. Thus a 
more varied utilisation of the physical environment brings 
with it a fuller, securer, and at the same time a more interest- 
1 The Consumption of Wealth, p. 48. 


STANDARDS OF CONSUMPTION 


309 


ing life. This is the chief explanation both of the rapid eco¬ 
nomic progress and the widespread optimism of ‘new coun¬ 
tries’. Their settlers, by selection the more adventurous 
members of the old communities, are more easily ‘unsettled’ 
in their routine and customary ways of life when they come 
into strange unexplored environments. Their exploring 
spirit is stimulated, partly by the necessities of a pioneer 
struggle, partly by the new zest for the game of life. With 
light attachment to the plot of land which reared them, they 
rapidly adapt themselves to new conditions and to changing 
scenes, acquiring new tastes and wants, and experimenting 
for their satisfaction. Some elements of this pioneer spirit 
are carried into the rapid evolution of great city life, and 
more than anything else are accountable for the ‘phenome¬ 
nally’ swift advance of the material civilisation of the United 
States iri comparison with European countries where simplic¬ 
ity and conservatism in popular consumption have held in 
leash the modern forces of capitalist production. 

There is, of course, another aspect of this iquestion which 
comes up in any analysis of human progress in the arts of 
civilisation. It is our old problem never fully soluble, of the 
degree of compatibility between actual wants or desires and 
human welfare in its highest sense. The charge of material¬ 
ism made against the more advanced industrial communi¬ 
ties, so far as it has validity, is based on an over-stimulation 
of certain instincts for physical satisfactions, due to the in¬ 
novating tendencies of modern capitalism with its elaborated 
apparatus of selling pressures. Here lies the excess that 
corresponds to a defect of primitive economic conservatism, 
a hasty exploitation of newly roused tastes that absorb too 
much of human nature in economic processes. “Getting 
and spending, we lay waste our powers.” 

Trial and error for man in a given habitat may, however, 
reasonably be held to have worked out standards of life, in 
the strict sense of that term, on a basis of biological utility, 


310 


STANDARDS OF CONSUMPTION 


which each generation accepts on this security and is indis¬ 
posed to tamper with. But conventional standards do 
change even in the most conservative classes of consumers. 
Novelties, at first due to the audacity and leadership of inno¬ 
vators, are taken on by imitation backed by a hankering for 
personal distinction, though such distinction soon evaporates 
as the novelty itself becomes fashionable, and then sinks to 
a conventional respectability. Where such novelties are 
engendered within a group by discovery and leadership, they 
commonly carry seeds of progress and a fuller life. Indeed, 
the primary distinction between man and other animals is 
that he can and does break away from purely instinctive and 
customary behaviour. So everywhere in human society the 
customary or conventional expenditure and consumption is 
punctured by some self-assertion making for variation, and 
this at all levels. For within each conventional control 
some scope for self-assertion in taste or prestige will be found. 
Where fashion’s reign is strongest in dress, the itch for per¬ 
sonal variation in shape, colour, or material is strongest. It 
is part of the perpetual conflict between the community and 
the individual, the struggle for personal liberty. There is, 
however, a rational distinction between changes in standards 
of consumption, initiated by individual consumers and ex¬ 
tended by imitation, and changes brought about from the 
producer’s side by business men through advertisement and 
salesmanship. The former changes carry a definite pre¬ 
sumption of utility, some progress in the art of consumption: 
the latter carry no such presumption, for advertisement and 
salesmanship may, for profitable ends, be skilfully directed 
to divert expenditure from a better to a worse use. Even if 
we admit that, normally, successful salesmanship will in¬ 
volve some merit in the goods, and some improved expendi¬ 
ture of incomes, the gain here is exceedingly precarious, as 
compared with that of changes in taste initiated by the con¬ 
sumer himself. 


STANDARDS OF CONSUMPTION 


311 


It may be held that civilisation, defined as “the art of 
living together comfortably in large numbers”, 1 consists 
in harmonising the needs of a standardised community with 
those of a freely self-expressive personality. 

But on the consuming side this problem is further compli¬ 
cated by the necessary adjustment of personal needs and de¬ 
sires within the smaller closer community, the family. In 
all the several elements which should govern consumption, 
the composition of the family in size, sex, age, etc., no two 
families are exactly alike, and a truly economic art of con¬ 
sumption should allow for all such differences. But the 
weight of convention is so heavy as to involve great waste 
in the prime essentials of food, clothing, and housing, in 
family budgets. 

§ 5. How deficient custom and convention, as affected by 
modern adaptations, are in terms of vital utility, can, how¬ 
ever, only be appreciated when to a sufficient body of actual 
budgeting knowledge the criticism of scientific dietetics and 
hygiene are applied. The view that trial and error, backed 
by the elimination of physically unfit, must have established 
a fundamentally sound food standard, is countered by such 
judgments as the following. “There can be no reasonable 
doubt from all the evidence now available that the great 
majority of our population are suffering from a deficiency 
in these essential parts of food (i. e., vitamins). The cost 
of this deficiency in human suffering and in economic loss is 
incalculable but certainly vast.” 2 

Recent declines in the rate of infantile mortality due to 
organised instruction in feeding, form a most striking testi¬ 
mony to the failure of custom and tradition to adjust food 
to human requirements. The science of physical hygiene is 
still in its infancy, but there is good ground for holding that 
reformed feeding, clothing, and housing, to say nothing of 

1 Carver, The Economy of Human Energy, p. 105. 

2 Annual Report for 1926-27 of the Medical Research Council. 


312 


STANDARDS OF CONSUMPTION 


other material factors, may be expected within the next 
few decades to add several years to the average age of man 
in civilised countries. 

§ 6. Such examples of vital errors in the actual evolution 
of standards of consumption are attributable in part, no 
doubt, to the ignorance of man and the insufficiency of his 
crude tests of survival utility in the goods that come up for 
his appraisal. He simply does not know enough about food 
values, sanitation, and other vital utilities. But that is not 
the chief explanation. There are two more powerful influ¬ 
ences in his choice. One is the relative cost of the different 
articles of food, clothing, etc., available. What articles are 
available will in simpler societies be determined by local 
natural resources, and even in civilised countries the prime 
elements in standards of living have been mostly fixed at 
times when areas of exchange were very narrow. If a family 
has to grow its own foods, it will concentrate its production 
and consumption upon those it can produce with least labour, 
with little respect for food values, or, in most instances, for 
any pleasures in variety of diet. Where land is scarce and 
hard to cultivate, this pressure from the cost side will, of 
course, be strongest. So in an Irish small-holding, potatoes 
long held the primacy in diet. In most parts of rural Eng¬ 
land few vegetables enter the farmer’s or labourer’s diet, 
partly, because they do not rank as serious food, but largely 
because of the trouble of growing them in small quantities. 
In towns, where foods drawn from wide areas are more vari¬ 
able and are sometimes cheap, new elements are more read¬ 
ily incorporated in a class standard. There is more craving 
for variety, and tasty new foods such as bananas and toma¬ 
toes get a quicker and wider recognition. But here we touch 
other influences determining the adoption of new goods, the 
pleasure, interest, or prestige, attaching to them. When 
economists like S. N. Patten explain that, “In the ratio of 
cost to utility which different articles have, is to be found 


STANDARDS OF CONSUMPTION 


313 


the condition which determines the standard of life”, 1 we 
must beware of identifying utility with intrinsic value, or 
even with economic service in the sense of enhanced effi¬ 
ciency. To represent man as a rational being, or even as a 
soundly instinctive animal, seeking to raise and improve his 
standard of living by satisfying all his actual and potential 
wants in something like the order of their ‘real importance' 
in the evolution of a higher life, is to succumb to a false ideal¬ 
ism. Patten himself rightly comments upon “the strong 
tendency of primitive men to use improved production to 
enable them to secure rare articles which appeal in the 
strongest way to the cravings of an abnormal appetite.” 
Nor is this peculiar to primitive man. A sudden consider¬ 
able rise in the wages of unskilled male labourers may go at 
first almost entirely into drink and related dissipations, the 
chief sources of conscious pleasure, not into improvements 
of food, clothes, or housing, with their slower and slighter ap¬ 
peals to conscious interest and physical desire. The recent 
rapid rise in women's wages in England has gone mostly into 
dress refinements as the chief field of pleasure and prestige. 
So with the nouveaux riches in most countries, their first 
reactions to their new status take shape in a riot of material 
extravagance, their second in showy philanthropy, or some 
prestigious satisfaction of the collecting instinct. But too 
much stress must not be laid upon such instances of con¬ 
spicuous waste. After the first disturbances attending a 
considerable rise of spending power, a process of settlement 
sets in, correcting some of the early errors and applying the 
new resources to a more general and harmonious reorganisa¬ 
tion of the standard of life. Even the new rich themselves 
can sometimes discern and imitate the finer, calmer graces 
of life in old settled aristocracies; and the higher-paid 
workers find something worthy of admiring imitation in the 
conventional respectabilities of a bourgeoisie. Believers in 
1 The Consumption oj Wealth, p. 47. 


314 


STANDARDS OF CONSUMPTION 


social progress are bound to hold that some sane human urge 
is expressed in the evolution of rising standards of consump¬ 
tion, as an integral aspect of civilisation. 

§ 7. Such considerations bearing on the formation of 
standards of consumption will serve to show the crudeness 
and fatuity of the old economic distinctions between neces¬ 
saries, comforts, and luxuries. The only valid distinction is 
between consumption that is good and consumption that is 
bad, welfare and ill fare. Whatever economic expenditure 
contributes toward the enlargement and enrichment of life 
is evidently a necessary. It is ‘wealth’ in the humanist 
sense. Whatever expenditure does not so contribute is 
waste or ‘illth’. 

Reverting, however, to the classical distinction between 
productive and unproductive consumption, we may regard 
the growth of the latter as the criterion of economic progress. 
That is to say, economic progress may be measured in terms 
of the surplus over and above that consumption necessary 
to ‘maintain’ the human energy employed in economic work. 
The larger the surplus thus available, as economic support 
for non-economic interests and activities, the higher the 
standard of civilisation and personality. For most of the 
interests and activities that lie outside the economic sphere, 
family life, friendship, and the various amenities of ‘social’ 
life, the acquisition of knowledge and the cultivation of tastes 
for art and literature, sport and recreation, in fact nearly 
all the sources of conscious enjoyment outside the material 
range, though not to be regarded as economic in their nature, 
demand some sustenance or aid from what we call here the 
economic surplus, the fund of progress. 

It is, indeed, upon the sound use of this surplus that the 
great controversy as to the value of our civilisation turns. 
The critics of that civilisation base their strictures upon the 
abuses of unproductive consumption, the waste, frivolity, 
and degradation in the luxurious goods and services that are 


STANDARDS OF CONSUMPTION 315 

its economic representatives, with the vitiation of the moral 
and intellectual life they go to nourish. If the scientific 
hygienists are mainly concerned with the elements of con¬ 
sumption reckoned as productive or economic necessaries, 
seeking to correct the deficiencies of their rude empiricism 
and conventionalism, so our ethicists or humanists fasten 
on the damages to the higher elements of personality and 
community from wrong uses of the fund of progress. One 
need not here cite the charges of materialism, vulgar ostenta¬ 
tion, physical and moral corruption, the mechanisation of 
the finer arts of life, made by the prophets of ‘a simple life\ 
It is better to rely upon the more sober judgments of the gen¬ 
eral educated public for our estimate of the human dam¬ 
ages attributable to the misuse of our progress fund. There 
is here a general agreement that the rapid growth of economic 
wealth has not brought its full tale of human happiness, that 
the advances of economic income have not in general been 
absorbed in developing the finer arts of human welfare. A 
large and growing body of educated opinion relates this mis¬ 
spending of the progress fund to its irregular, unequal, and 
unfair distribution. 

Put into formal shape the criticism runs thus. Man is a 
creature with unlimited capacity for developing new tastes, 
activities, and interests. But there are two chief related 
conditions in the economy of their satisfaction, pace, and 
harmony. If the means to satisfy new tastes or interests is 
miraculously showered upon a man, he will either ruin these 
budding tastes by cruder enjoyments, or he will use his new 
resources to carry old satisfactions to satiety. In either 
case, he will upset the organic harmony which should direct 
his whole economy of wants and satisfactions. Such wastes 
are visible, not only in the ‘new rich’, but in the wage-earners 
when some stroke of chance or strategy yields a relatively 
big sudden advance of income. If the fund of economic 
progress, due to the increasing control of man over nature, 


316 


STANDARDS OF CONSUMPTION 


is to be applied well, it must conform so far as possible to 
our ‘natural’ law of distribution according to capacity for 
use, that is to say, it should flow into personal and communal 
consumption, so as to nourish and satisfy those tastes and 
interests which were ripening towards conscious recognition 
just above the level of the earlier standards. Making due 
allowance for wastes in the normal evolution of wants, his¬ 
tory supports the view that gradual advances in income in 
a community, or in a grade of workers, is on the whole ab¬ 
sorbed and assimilated in improved standards of living. 
Sudden miraculous gains breed psychological disorder re¬ 
flected often in physical excesses. Gradual gains exercise 
an educative influence that shows itself, not only in a sound 
use of the new increments, but in organic improvements of 
the whole expenditure. An increasing proportion of the in¬ 
come is applied to the purchase of more durable goods, or by 
saving or insurance to more distinct provisions against eco¬ 
nomic losses. An equitable distribution of the economic 
surplus would thus be doubly advantageous, in securing a 
sounder use of the new income, and in regularising the play 
of economic forces. 

§ 8. In an earlier chapter we discussed the quantitative 
interdependency of production and consumption, and the 
importance of their right adjustment in the interests of pro¬ 
ductivity and employment. But a study of the qualitative 
interactions of the arts of production and consumption is of 
still more critical importance for the human valuation of 
economic processes. Recognising, as we do, that in bodily 
and mental functions and requirements the members of a 
community have much in common, there is a strong support 
for the arts of standardised mass-production which play so 
large a part in modern industry. Modern capitalism may 
thus be said to be based upon the uniformity of human 
nature. But the sound economy of standardised production 
can be carried somewhat further. Where absolute identity 


STANDARDS OF CONSUMPTION 


317 


of needs and tastes does not exist, the similarity may be so 
close that, in order to secure the economies of routine pro¬ 
duction, the differences may reasonably be ignored. Large- 
scale production, indeed, can itself, by grading of size, shape, 
and even quality, go far towards meeting individual needs 
diverging from the mean, though never all the way. Where 
the market is large enough, food, clothing, furniture, and 
many other requisites, can be standardised in sufficient vari¬ 
ety to satisfy all ordinary tastes, or else some final act of 
individual adaption can be grafted on to the standardised 
processes . 1 But it is impossible to deny the tendency of 
modern manufacture and commerce to press the economy of 
standardisation far beyond these limits, bribing consumers 
to subordinate their natural differences in the interests of a 
cheap conformity. 

1 “It is wrong to suppose that the exigencies of large-scale produc¬ 
tion allow no scope for the expression of individuality. Really, we 
have a much wider range of goods to draw from than social critics 
give us credit for. Our taking advantage of the economics of large- 
volume production does not mean that all of us have to live so that 
we fit a standardised consuming pattern. There are limits to the 
gaining of economies by increased size in industry. As the population 
increases, as its new arrangements make distributive functions easier, 
as transport facilities grow more efficient and cheaper, so enlarging 
the market-areas for goods, wider ranges of choice instead of more 
restricted ones result”. (R. G. Tugwell, Industry’s Coming of Age, 

p. 108). 

Even where choice is narrowed, it does not follow that there is any 
real loss of liberty or personal satisfaction. “A few years ago there 
were being manufactured in the United States 179 different varieties 
of these lamp bases which made necessary, even for the consumer 
in the home, the memorising of a considerable specification before 
procuring a lamp which would fit the special socket which happened 
to be installed in that particular house. At the present time, the 
seventy different manufacturers who are producing lamp bases in the 
United States have reduced the number of varieties to six. In the 
same industry, as late as 1918, there were thirty-seven distinct varie¬ 
ties of attachment plugs in use, each one good in itself, but no one 
interchangeable with any other. At the present time only one type 
is made, with obvious advantages to everyone concerned”. {Ibid., 
p. 134). 


318 


STANDARDS OF CONSUMPTION 


Here, perhaps, we touch the gravest issue between the 
economic system and humanity. The dominant economic 
forces of our time are employing all the resources of the 
physical sciences and of applied psychology to produce large 
masses of identical goods, and to persuade large masses of 
persons to purchase and consume them. The economics of 
large-scale production are carried from the cruder into the 
finer forms of manufacture, taking over most of the work 
formerly done by skilled craftsmen: the fine arts themselves 
are invaded by ‘art goods’ and mechanical devices. 

Nor is the peril confined to material commodities. There 
is a serious attempt, partly in the interest of profitable busi¬ 
ness, partly of political and intellectual conservatism, to 
standardise the mental processes of whole communities. If 
all the members of a community can be induced, not merely 
to buy the same foods, wear the same clothes, use the same 
furniture and other material appliances, but to learn the 
same facts, think the same thoughts, feel the same emotions, 
hold the same opinions, cultivate the same tastes and inter¬ 
ests, all the machinery of life, political and spiritual, as well 
as physical, will run smoothly, safely, and economically. If 
schools and colleges can get to work, planning and training 
the plastic minds of youths into common ways of thinking 
and common valuations of life, while adult education on 
similar lines is conducted by the press, the churches, the 
radio, the movies, the theatre, repressing or suppressing 
minority tastes and opinions and personal eccentricities of 
thought and conduct, material and mental goods can be pro¬ 
duced most cheaply and most profitably, and complete 
regularity and security of life will prevail. Though primar¬ 
ily economic in origin and impetus, this movement invades 
all other fields of human interest and activity through the 
economic sustenance which all of them in some measure re¬ 
quire. The syndicated press, the institutionalised churches, 
the centralised wireless station, the film, the gramophone 


STANDARDS OF CONSUMPTION 


319 


record, all derive from the economy of large-scale produc¬ 
tion: all are interested to produce a standard mind. 

§ 9. Now so far as mankind is identical and closely similar 
in physique, mental make-up, and circumstances, this econ¬ 
omy is serviceable. Educationalists sometimes over-stress 
the uniqueness of personality. The many common charac¬ 
ters, needs, and interests of men afford large scope for rou¬ 
tine processes and mass production. Up to a certain level 
a standard mind is desirable. Even in the highest planes of 
culture provision must be made for sympathy and common 
understanding: elaborate codes of social signs, accepted 
bodies of knowledge, common attitudes of mind are of the 
very substance of civilisation. Nor need we hold that such 
common body of culture, with all its institutions, exists solely 
as a groundwork for the unique qualities of personality, that 
community as such has no value. The life that all men live 
in common may, according to any universal standard, or in 
God’s eyes, be immensely more valuable than those slight 
divergencies which give distinction and value among man¬ 
kind. But even men esteem highly the qualities which make 
them to get together. 

There is, moreover, as we have seen, no natural conflict 
between the claims of society and of individuality. On the 
contrary, in society or community individuals achieve a 
fuller individuality. This cooperation for the common good 
is so productive as to enable them to satisfy their common 
needs on a contributive basis which places a far larger pro¬ 
portion of their time and energy at their several disposals for 
the satisfaction of their several desires. An intelligently 
ordered and progressive society would, by constantly im¬ 
proving organisation and technique, be able to satisfy the 
common requirements of its members by a continually di¬ 
minishing call upon their energies. This, however, assumes 
a static interpretation of ‘common requirements’. It also 
assumes that individuality is nowise served by participation 


320 


STANDARDS OF CONSUMPTION 


in the common enterprise. Neither assumption is correct. 

The standard of ‘common requirements’, of community in 
general terms, does not ‘stand’ but grows in size and in com¬ 
plexity, and from that deeper, richer common soil individuals 
draw in such wise as to enrich their personalities. We can¬ 
not, therefore, accept a definition of human progress which 
implies such an economy of common or cooperative work as 
will leave everybody free to employ an ever growing pro¬ 
portion of his energy for his own private ends, on the as¬ 
sumption that in this way a best personality is attained. 
The improved economy of human cooperation must go 
partly to the enlargement of individual liberty but not 
wholly. Community must also be enlarged. To work out 
the harmony of these distinguishable but interacting proc¬ 
esses is the problem of civilisation. There is no accepted 
key to this problem. For some people value individual 
freedom more than others, and prefer a more meagre person¬ 
ality provided it is ‘their own’. But one need not over¬ 
stress the difficulty. There will be a fairly general assent to 
the view that progressive welfare comprises both a larger 
measure of individual liberty and a closer and more complex 
cooperation with a growing sense of community. 

§ 10. We may, therefore, pose again the issue raised by 
the economics of mass-production and its assault upon the 
individuality of the consumer. A society whose members 
avail themselves of improvements in the technique and or¬ 
ganisation of industry to demand ever increasing quantities 
of goods conforming to the economy of mass-production, 
must find themselves in the following quandary. The larger 
leisure and spare energy, which machine-production might 
have won for them, are lost by the necessity of an ever in¬ 
creasing output. Even if some shortening of the work-day 
takes place, the intenser labour of the shorter day may rob 
it of its human value. But more important still is the ef¬ 
fect of the consumption of larger numbers and varieties of 


STANDARDS OF CONSUMPTION 


321 


‘standard’ goods upon the mental and physical attitude of 
consumers. More of their free time and energy is devoted 
to modes of consumption which do not call for, or even per¬ 
mit, the display of individual tastes and activity. This is 
best illustrated in non-material branches of consumption, the 
standardised mental and recreational products of the press, 
the cinema, the radio, which draw their profitable strength 
from the economy of mechanical repetition. 

The standardised clothing, housing, furniture, and trans¬ 
port, no doubt, stamp close conformity upon the body and 
mind of masses of men, and the revolt of personal culture 
against such uniformity cannot be ignored. But the demand 
for individuality in these lower levels of a standard of life can 
in the present economic era only be confined to a relatively 
prosperous minority. Most people are wisely advised to 
submit to a good deal of conformity in these material arti¬ 
cles, provided that in other spheres they can possess their 
souls in freedom. 

The danger is both quantitative and qualitative. If the 
salesmen of the mass-producers can tempt consumers ever 
to enlarge their demand for standard goods, they can gradu¬ 
ally standardise the whole man and his family into servitude 
to a normal type, idealised as a ‘100 per cent American’ or 
‘God’s Englishman’, with all the conventions and respecta¬ 
bilities moulded by the requirements of profitable business. 
Moreover, the subjection of the great majority of the produc¬ 
ing population to a long working day of routine with sub¬ 
divided labour militates against a discriminative use of their 
leisure and a finer cultivation of individual tastes and 
activities. 

§ 11. It is, however, easy to over-state the case against 
machinery as standardiser. It is intrinsically improbable 
that modern capitalism can reverse the entire trend of human 
history which exhibits man as continually advancing from a 
group-life regulated in every detail, both of work and other 


322 


STANDARDS OF CONSUMPTION 


occupations, by a rigorous system of customs and tabus 
along a road of increasing opportunity for self-direction and 
individualisation. The customary regulation of primitive 
workmanship no doubt afforded some slight scope for per¬ 
sonal skill in use of tools and handling of varied qualities of 
material, while most men and women could put their hands 
to many sorts of work. But' within each primitive craft 
tradition was exceedingly repressive of invention or experi¬ 
ment, and the products showed very little tendency towards 
variation. The growing diversion and specialisation of la¬ 
bour that came with expanding markets gave far more per¬ 
sonal liberty than it took away, for the widening human 
contacts, expressed in ever growing varieties of ‘foreign’ 
goods, shattered the conservatism of primitive groups by 
stimulating new needs and liberating individual choice in 
modes of life. The loss of variety in work was more than 
compensated by the increased variety and quantity of 
consumption. 

There are those who will accept this view of industrial 
evolution up to the advent of modern machinery. Up to 
that time man, though specialised in work, maintained the 
mastery of his tools, and was, in effect, a skilled craftsman, 
and this skill of the producer gave some character and qual¬ 
ity to the goods which were imparted to the consumer. The 
charge against machinery is that it has destroyed liberty at 
both ends, enslaving alike producer and consumer. The 
danger and damage may perhaps be admitted in what may be 
considered ‘a transition period’ in which the revolutionary 
factor, the machine, has evolved technically at a faster pace 
than the controls needed to secure its human services. This 
is only another way of stating that machinery and its eco¬ 
nomics have outrun their proper functions. What is needed 
is better machinery and more economies of routine produc¬ 
tion, so that all the goods and services required to satisfy our 
common human wants may be purchased at a reduced cost 


STANDARDS OF CONSUMPTION 


323 


in men-hours, under conditions of pay which leave a grow¬ 
ing margin after these standard wants are satisfied. 
Whether satisfactory progress can be made along this line 
without some definite ‘socialisation’ of the routine processes 
remains the largest topic of economic controversy. The so¬ 
cialist insists that the standardising excesses of big business 
cannot be curbed so long as private profitable enterprise 
continues: the individualist insists that the clumsy hand of 
organised society will paralyse the springs of efficiency and 
progress. 

This issue belongs, however, to our later discussion of the 
relations of government to industry. Here it is more ger¬ 
mane to consider the resistances to standardisation offered by 
consumers in their capacity of human beings. Standardisa¬ 
tion puts consumers in the unpleasant position of behaving 
as if they were exactly alike when they do not feel exactly 
alike. In other words, the mass-producer and his salesmen 
have to meet and overcome the unsatisfied personal predilec¬ 
tion of the consumer. Mass production is always up 
against the fact that ‘tastes differ’, that what is one man’s 
food is another’s poison, and that in mental products ‘quot 
homines tot sententiae\ Where it is a question of the 
standard article, or nothing, men will sink their differences, 
but when they can ‘afford’ to indulge their private prefer¬ 
ences, they will do so. The capacity of skilled salesmen to 
direct private preferences into common channels is, no doubt, 
considerable when herd behaviour, in reaction to a common 
environment, educates a herd-mind. The manners and the 
mind of Main Street are perhaps the greatest achievement of 
mass-production. But that achievement should not be over¬ 
rated. By and large it has been the result of ‘rush tactics’, 
the sudden capture of the vacant minds of millions of busy 
extroverts immersed in the rapid material development of 
new cities by methods of improvised cooperation which had 
no use for critical refinements. It may be taken to represent 


324 


STANDARDS OF CONSUMPTION 


the last stage of the pioneer, converted to gregariousness. 
Already in America, not merely in the older settlements but 
in the Babbitry of the Middle-West, resistances are form¬ 
ing against the domination of the standardiser. It would 
be contrary to nature that a human stock, continuously 
recruited for centuries from recalcitrant protestants and 
other adventurous and self-assertive individuals in diverse 
countries of the earth, should permit itself to be planed down 
into a permanent uniformity of character and behaviour. 
All the efforts of mass-producers, advertisements, chain 
stores, mail orders, and educational ‘hundred per centers’, 
cannot produce the smooth type of purely receptive Ameri¬ 
can that is desiderated. When conventional security and 
prosperity attain a certain level, the eccentric and the 
unique in tastes, desires and activities, will claim their liberty 
and satisfactions. Personal initiative and distinction are 
ultimately irrepressible: well-to-do, self-respecting citizens 
will want clothes that fit a body that is not the same as other 
bodies, foods suited to their peculiar physical condition, 
housing accommodated to the special make-up of their fam¬ 
ily. They will discover wider differences in their minds 
than in their bodies, and education will unfold new divergen¬ 
cies. Nor is this the evolution of rare natures, a cultured 
few. It is a return to that general process of individuation, 
checked and even paralysed, as it might seem, by the rapid 
rush of mechanical production with its mental adjuncts. It 
will not be possible for the beneficiaries of mass-production 
and standardisation to hold down indefinitely the urge of the 
unique in human nature, dictate their wants and satisfac¬ 
tions, mould their opinions and their valuations. Tamen 
usque recurret! Since people are not the same, they are 
always liable to discover their dissimilarity, and even to 
value that dissimilarity because it gives distinction. Thus 
they tend to bring an excessive spirit of nonconformity to 
combat the forces of standardisation. The new rich exhi- 


STANDARDS OF CONSUMPTION 


325 


bit this excess humorously in their conspicuous waste, their 
garish display, their passion for acquiring the rare or unique 
in gems, pictures, poetry, and books. America stands out 
more conspicuous in this struggle than other countries be¬ 
cause of the pace and intensity of the standardising process. 
But in every industrial country the war between commercial 
standardisation and personality is being waged. Every¬ 
where creative evolution calls for a new social harmony in 
which the similar and the diverse in human nature shall be 
reconciled in economic satisfaction. If in the present era 
the standardising forces seem too powerful, that is evidently 
due to a lack of social government, or in other words, to a 
preponderant power of the profit-seeking side of mechanised 
industry. 

§ 12. In discussing the opposition to the standardising 
tendency we have chiefly confined ourselves to the con¬ 
sumer’s attitude. But the revolt of the producer is not less 
significant. Though the subdivided workers in the stand¬ 
ardised processes sometimes seem to acquiesce in their 
monotonous routine, as in the consumption of the quanti¬ 
tative products it turns out, their human nature gives no 
real consent to this starvation of their creative activities. 
But so potent is the reign of the machine-economy that no 
direct protest of craftsmanship is practicable for most 
workers. All they can hope to achieve is some alleviation 
of their narrow task by a shorter work-day, a five-days week, 
or longer holidays, affording time and opportunity for the 
varied activities inhibited by the conditions of their indus¬ 
trial service. To many reformers this seems the only path 
of progress, a shortening of the hours of labour which shall 
afford ampler time and energy to the worker in factory, 
mine, farm, workshop, or store, to run his automobile, work 
in his garden, and cultivate the other thousand and one 
activities of family and social life. A real curtailment of 
the supremacy of the machine seems to them utopian or even 


326 


STANDARDS OF CONSUMPTION 


undesirable. But as we have already noted, it is very diffi¬ 
cult to liberate the worker by lightening his work, so long as 
in his capacity of consumer he is content to express his per¬ 
sonal progress in enlarged demand for standardised goods. 
The full importance of qualitative individual consumption is 
only realised when account is taken of its reaction on methods 
of production. So long as consumers prefer to live exactly 
like their neighbours, will refuse all natural divergences of 
taste, will be content with the merely ‘good enough’ provided 
it is cheap and there is more of it, as workers they cannot 
win much liberation from their narrow toil. It is clearly 
to the education of the consumer and his demand for more 
personal and individual satisfactions that society must look 
for effective opposition to standardisation in work. If I 
insist upon a well-cut and exact fitting coat, I employ a 
skilful cutter, not a machine; if I want my house furnished 
and decorated according to my taste, I am liberating a num¬ 
ber of workers from servitude to machinery and making 
artists of them. So long as only a few cultured well-to-do 
members of society are thus affected, the revolt against the 
machine will be inconsiderable. But if a larger and larger 
proportion of the population, endowed with security and suffi¬ 
ciency of livelihood, begin to substitute personal tastes and 
requirements for conventionality and conformity, a sub¬ 
stantial reaction will take place upon the arts of industry. 
For all demand for individuality in products is a call for 
personal skill in workmanship. It is an advance towards 
artistry. For though a distinction is often drawn between a 
craft and a fine art, on the ground that the former is more 
consciously and crudely utilitarian in its aim, the difference 
is chiefly one of degree in creative consciousness. The 
craftsman works more to plan, and knows more clearly what 
he is after, whereas the finer artist gives himself up more 
freely to the guidance of the creative spirit. Moreover, he 
is working primarily for himself, for the realisation of his 


STANDARDS OF CONSUMPTION 


327 


idea, not for the satisfaction of the purchaser of his picture 
or his poem. But the craftsman also is interested in his 
work and in doing it well, irrespective of the purchaser, and 
in so far he is an artist, while the artist who produces ‘pot¬ 
boilers’ becomes a craftsman. 

§ 13. For maximising economic welfare and still more 
human welfare, it is desirable that as much as possible of 
production and consumption shall participate of the nature 
of fine arts. Indeed, in every fine art the functions of pro¬ 
ducer and consumer are in a measure fused. The painter 
who paints under an impulse, the poet whom the spring in¬ 
spires to sing, every writer who ‘must express himself’, is so 
far his own consumer. Put in economic language, he gets 
‘utility’ at both ends, obeying the impulse to create and en¬ 
joying what he creates. If, as William Morris utoped, you 
could get a society in which everyone enjoyed his work, 
and the products satisfied all the needs of individual con¬ 
sumers, all economic problems would be solved. Indeed, the 
need for any specific economic science would evidently dis¬ 
appear. Economic activities would be merged in the total¬ 
ity of human behaviour. 

But in our actual world of costs and scarcities, it is im¬ 
portant to secure for the art of consumption its proper place 
as a factor of the economic system. Quantitatively and 
qualitatively, it exercises a directive and determinant influ¬ 
ence upon the volume and character of production to which 
most economists have given a very scanty recognition. For 
while it is true that most alterations, additions, and improve¬ 
ments in standards of consumption are initiated from the 
producer’s side, they must conform to the latest needs, in¬ 
terests and satisfactions of consumers, if they are to succeed 
as business propositions. Though it would be an over¬ 
statement to say that consumers’ satisfaction was the sole 
end and purpose of all economic activities, seeing that some 
of these activities carry enjoyments of their own, any sound 


328 


STANDARDS OF CONSUMPTION 


social-economic theory must test economic progress mainly 
from consumers’ satisfaction. 

But here once more we encounter our task of evaluating 
economic satisfactions in terms of human values. Recog¬ 
nising that the bases of every standard of living lie in the 
reciprocal relations between man as a physical organism and 
his material environment, on the lines made familiar by Le 
Play and his followers under the triad, ‘Place, Work, Folk’, 
we also must recognise innumerable possibilities of error and 
waste in building on these bases. For, granting that the 
inherited dispositions and behaviour of man impose upon him 
certain ways of living with survival value, this biological 
equipment is less adequate in man than in any other animal 
to secure for him a satisfactory life. As reason supplants 
and displaces the specific animal instincts, in order to enable 
him to create and cope with changes df environment so as to 
get a fuller life, the possibilities of going wrong multiply. 
Such of these errors as are manifestly hostile to life are elimi¬ 
nated by natural selection, but those that do not deal early 
death may be retained and incorporated in a low customary 
standard. The empirical processes of trial and error by 
which novelties enter standards of consumption, whether 
initiated from the producer or the consumer side, carry no 
sufficient guarantee of genuine utility. Only so far as cur¬ 
rent tastes and appetites are reliable indices of human util¬ 
ity, only so far as we can identify the desired with the de¬ 
sirable, is the evolution of customary standards of life a 
sound human art. But it is needless to cite the ample evi¬ 
dences of the errors and wastes that are represented in every 
human standard of consumption. We have already noted 
some of these defects in the evolution of racial or class and 
in other ingredients of expenditure, even when the evolution 
is a slow regular process. Where it is rapid and irregular, 
as when white contacts with backward peoples transform 
old established standards, or introduce corrosive elements 


STANDARDS OF CONSUMPTION 


329 


with abnormally intensive appeals to animal appetites, a 
corrective is afforded by the expensive method of race sui¬ 
cide. Here, however, we are concerned, less with these vio¬ 
lent cases where nature intervenes, than with those admitted 
defects of consumption which do not perceptibly impair the 
will or power to live and transmit issue, but which, forming 
part of the social heritage, impair the life and happiness of 
successive generations. Primitive man, normally regulated 
by custom and therefore unused to purely personal restraint, 
when exposed to novel temptations such as alcohol or opium, 
is notoriously incapable of resistance. Why the economy of 
his biological make-up should have equipped him with ap¬ 
paratus so detrimental to survival, biologists do not explain. 
Or perhaps such explanation is the office of theology with 
which such defects may rank as 'original sin’. But so potent 
are these possibilities of error that civilised governments now 
regard it as an obligation to humanity to regulate or prohibit 
some of these appeals to primitive appetites. Opium, alco¬ 
hol, firearms, slaves, are to an increasing extent made illi¬ 
cit objects of traffic. No doubt such regulations are not 
wholly humanitarian in motive: violent disorder threaten¬ 
ing white control or property, and the depletion or inefficiency 
of serviceable labour furnish subsidiary grounds for regu¬ 
lation. 

§ 14. But the interest for us here is the large-scale ex¬ 
pression of the principle of regulation of standards of living, 
so as to make them conform to standards of human 
welfare. All governments have been wont to exercise dis¬ 
ciplinary power over their citizens, in the interest of health 
and morals, and this discipline has involved some regulation 
of consumption. Elaborate sumptuary laws have been de¬ 
vised to check luxurious expenditure, sometimes of general 
application, sometimes confined to certain classes. The 
laissez jaire assumption, that every man should be left in 
complete freedom to pursue his own modes of living, has 


330 


STANDARDS OF CONSUMPTION 


never found full acceptance. It is true that most sumptuary 
restrictions were not wholly motivated by considerations of 
health and morals, but also had regard to matters of national 
finance, or internal trade. But though the largest interfer¬ 
ence with the freedom of consumers by modern governments 
is compassed by tariff restrictions, mainly for the protection 
of internal industry and for public revenue, the disciplinary 
motive still plays its part. The pre-war import duties im¬ 
posed by Britain were, with the single important exception 
of sugar, confined to articles classed as luxuries, while such 
of the special war-duties as are retained on the protected 
list will mostly fall into this category. So far as such meas¬ 
ures have the effect of raising prices to consumers, they must 
be regarded as helping to mould consumption into desirable 
standards, by reducing the consumption of, though not neces¬ 
sarily the expenditure upon, the less serviceable and desir¬ 
able objects. The maintenance of the high taxation of alco¬ 
holic drinks and tobacco are generally acquiesced in through 
recognition of the comparative disutility of these articles of 
consumption even by those who purchase and enjoy them. 
The disciplinary effect of these measures is, however, some¬ 
times contested on the ground that since these and certain 
other luxuries afford more conscious satisfaction in their 
consumption than do most necessaries, an arbitrary raising of 
their price does little to diminish their consumption, but di¬ 
verts to their purchase a larger proportion of income, so 
curtailing expenditure upon more useful articles of consump¬ 
tion. A man, they say, will have his drink and his tobacco, 
whatever it costs. The elasticity of demand is, no doubt, 
small in what we may term the staple luxuries, but some 
restriction is exercised by every rise of price, and therefore 
taxation must be recognised as an instrument by which 
organised society helps to make the desired conform to the 
desirable. 

But such discipline may be dismissed as slight and inci- 


STANDARDS OF CONSUMPTION 


331 


dental, compared with the large deliberate encroachments 
upon the rights of the private consumer in which most mod¬ 
ern states engage. These encroachments are of two orders. 
Certain public services, health, education, recreation, civic 
improvements, and the like, involve the removal of an ever 
larger amount of income from the control of the private 
consumer, in order to carry out some communal conception 
of the desirable. So far as the taxation for such purposes is 
devised so as to tap unearned surplus, and is applied with 
reasonable discretion and economy to these social services, 
large additions to the well-being of the people are undoubt¬ 
edly compassed. For such taxation in effect substitutes 
consumption of primary utilities and serviceable opportuni¬ 
ties for consumption upon unserviceable luxuries, by methods 
which expand the use of these utilities and the service of these 
opportunities. Thus a double gain is effected, by a better 
distribution of the real income, and by converting a larger 
share of it into forms which in their consumption yield more 
human welfare. These large gains leave an ample allowance 
for whatever wastes are attributable to the inefficiency or 
other defects of official administration. For most of these 
public services are directly addressed to the provision of 
larger and better opportunities, such as health and education, 
not to the imposition of new habits of life upon individual 
citizens. They offer nutriment and stimulus to the enrich¬ 
ment of personality, without seeking to reduce it to a com¬ 
mon standard. Good drainage, well-paved streets, free 
access to books, classes, pictures, open spaces for body and 
mind, medical and legal aids, insurance against the common 
risks of ill-health and accident, such elements of welfare can 
only be made accessible for all by collective finance and ad¬ 
ministration, and their united effect is an enlargement of the 
real liberty of all citizens to pursue successfully their per¬ 
sonal ends. 

§ 15. So much for the constructive consumption achieved 


332 


STANDARDS OF CONSUMPTION 


by the community as a contribution to a desirable life. The 
other disciplinary action takes shape in prohibitions and re¬ 
strictions placed upon the private standards of individual 
consumption, either on the ground of social damage through 
disorder or infection, or by the assumption of a public right 
to safeguard the individual or his family against definitely 
injurious applications of purchasing power. How far the 
community may safely and advantageously go in this pro¬ 
hibitive policy is matter of reasonable controversy. There 
is, however, general agreement that certain articles of con¬ 
sumption are so dangerous to life, health, or morals, as to 
justify restrictions on their use and purchase. The prohibi¬ 
tion of the sale of poisonous or dangerous drugs, and the re¬ 
striction of the sale of others to authorised persons or at 
authorised times and places, or in limited quantities, the 
regulation of the sale of alcohol and of prostitution and gam¬ 
bling, the censorship of immoral publications, pictures, plays, 
and other entertainments, come under this category. They 
are to be regarded from the economic standpoint as definite 
attempts of society to raise the standard of consumption of 
certain persons or classes by eliminating elements of the un¬ 
desirable. 

How far governments should go in these constructive and 
restrictive policies will evidently vary with the different 
views of the value set on individual liberty on the one hand, 
and of the wisdom of governments upon the other. Here 
Mill's distinction 1 between self-regarding and other-regard¬ 
ing conduct cannot help us much. For the implied judgment 
that a person should be at liberty to injure himself in body 
or mind by any sort of foolish conduct, provided he does not 
injure others, has no relevance in the web of interdependen¬ 
cies presented by any actual society. The only absolute rule 
of social interference is the consideration whether such in¬ 
terferences conduce upon the whole, and in the long run, to 
1 J. S. Mill, Essay on Liberty. 


STANDARDS OF CONSUMPTION 


333 


enfeeble or to strengthen the will and capacity of the sub¬ 
jects of such interferences to realise themselves in ways serv¬ 
iceable to society. Here the value set upon the unique in 
personality will give powerful support to securing for every¬ 
one the right and opportunity to make his own mistakes and 
exercise his own will to correct them, provided that these 
mistakes and corrections are not too costly to his dependents 
or other members of society. But even such a principle 
does not carry us very far, for the social costs of such personal 
experiments will be assessed with wide differences by differ¬ 
ent minds. Much will depend upon the respective stress 
upon order and adventure. Those who prize adventure as 
a desirable cost and instrument of personal and social prog¬ 
ress will favour the greatest freedom of conduct, for individ¬ 
uals are far more prone to initiative in life than are govern¬ 
ments. It is no doubt possible to conceive governments 
accepting the advice of able experts upon various ways of 
life, and enforcing rules of conduct which would improve 
health, intelligence, and morals, so enabling its members to 
enjoy a longer and a fuller life than if left more to their 
private devices. Such regulation, positive and negative, 
might-go far beyond the limits authorised by the accepted 
knowledge of to-day. Fuller understanding of vitamins and 
other food values, of glandular secretions and other deter¬ 
minants of health and physical efficiency, might lead to the 
evolution of a dietetic and other physical economy that 
would eliminate not only alcohol and tobacco, but innumer¬ 
able other foods and articles of consumption, while prescrib¬ 
ing for the various ages, sexes, and conditions of health and 
occupation, right regimens, enforced by education or coer¬ 
cion upon all members of the community. 

Nor need such regulation confine itself to the material 
elements in standards of living. Good habits of every sort 
might be inculcated, early rising, eugenic marriages, right 
marital relations, rearing of children, the regulation of the 


334 


STANDARDS OF CONSUMPTION 


home in all details, social behaviour outside the home 
there is no sphere of activity, whether involving economic 
consumption, or not, that might not be invaded by this ex¬ 
pert rule. And why not? it may be said. Is not the will¬ 
ingness to take advice of recognised experts in every depart¬ 
ment of life the test of an intelligent man? Educated men 
and women are more and more willing to alter their cus¬ 
tomary diet, clothing, exercise, and other physical habits, 
on skilled advice. They even accept expert authority as 
to the pictures and music they shall admire, the books and 
plays that shall interest them. In a thousand ways the 
desired is adjusted to the standard of the desirable. Besides, 
it may be urged, here is no question of coercion, of enforced 
orders and prohibitions, but of a free intelligent acceptance. 
There are, however, as we see, modes of persuasion which do 
not differ essentially from legal coercion and may be much 
more unreliable. The wiles of skilled salesmanship, forti¬ 
fied by the forces of imitation and convention, are ill guaran¬ 
tees of the desirable. The vagaries of taste and fashion are 
mostly products of an interested expertise operating by mass 
suggestion. Yet in alert communities, avid for novelty and 
with growing wealth, they can graft all sorts of dietetic and 
hygienic changes, art interests, and religions upon class 
standards of life. 

§ 16. The problem of the part which expertise may play 
in the improvement of standards of consumption is not, 
therefore, essentially a question of the limits and capacities 
of governments, though legal coercion has its special psy¬ 
chological contribution. It is the problem of a reliable, 
disinterested, and progressive expertism on the one side, and 
an intelligent assimilative public on the other. Even a 
willing acceptance of authority has its risks and costs in some 
weakening of individual initiative and experiment, but the 
net gain is indisputable, where knowledge and even sound 
taste are the criteria. Discussing this issue on its high intel- 


STANDARDS OF CONSUMPTION 


335 


lectual level in the question of the value of literary 
academies, Matthew Arnold makes this admirably balanced 
presentation. 

“So far as routine and authority tend to embarrass energy 
and inventive genius, academies may be said to be obstruc¬ 
tive to energy and inventive genius, and, to this extent, to 
the spirit’s general advance. But then this evil is so much 
compensated by the propagation, on a large scale, of the 
mental aptitudes and demands which an open mind and a 
flexible intelligence naturally engender, genius itself, in the 
long run, so greatly finds its account in this propagation, and 
bodies like the French Academy have such power for pro¬ 
moting it, that the general advance of the human spirit is 
perhaps, on the whole, rather furthered than impeded by 
their existence.” 1 If the balance can thus turn in favour 
of expert authority in matters where taste, tone, and other 
imponderables, so largely enter, the advantage should be 
much greater and more reliable in matters more amenable 
to scientific proof. 

This balance of gain is, however, contingent upon a con¬ 
scious, a willing, and a more or less intelligent, acceptance 
by the beneficiaries. In other words, it demands the active 
intelligence of the consumer. The legal or other enforcement 
of standards of consumption or behaviour, where this willing 
intelligent acceptance is absent, can only be defended on 
urgent grounds of social safety. For, where such spiritual 
contact between the expert authority and the beneficiary is 
lacking, several additions to the debit side of the account 
must be made. The expertism itself will harden and mech¬ 
anise through lack of appreciative criticism. The rules it 
prescribes will be largely non-enforcible through resentment 
and suspicion of the public. Even if the expert rule be 
sound in itself, the fact that it has no real consent of the 
governed behind it, is gravely detrimental to its right observ- 

1 Critical Essays. “The Literary Influence of Academies.” 


336 


STANDARDS OF CONSUMPTION 


ance. For any sudden enforced change in a long established 
order of living may entail consequences that lie beyond the 
purview of the expert. This is well illustrated from the 
history of the contacts of civilised with backward peoples 
when the attempt to enforce white standards of hygiene, 
decency, or morals has disintegrated the primitive group 
standards and even led to the extermination of whole peoples . 1 
Such violent results are unlikely to occur among peoples 
inured to change and growth, as are all civilised peoples. 
But even then it is not safe to assume that an enforced 
elimination of some element of the accepted standard of 
living, or the addition of some new element, is without im¬ 
portant disturbing reactions upon other elements in what 
must be regarded as an organic whole. Expert advisers, 
confined as they often are to study of particular reforms 
in hygiene, education, economics, morals, are seldom quali¬ 
fied to pass upon the total or net effect of the changes they 
seek to introduce into these delicately adjusted organic 
wholes. For long established standards of consumption are 
evolved under slow and continuous conditions of trial and 
error which have brought them into harmonies that are at 
least consistent with a measure of static well-being, whereas 
any quick interference with such delicate adjustments in 
the interests of progress may dangerously disturb these 
harmonies. The introduction of clothing into the ‘standard’ 
of Polynesian islanders is a notorious instance of such unde¬ 
signed reactions. The rapid urbanization of stocks accus¬ 
tomed for countless generations to ways of life determined 
by their rural environment and work, without doubt carries 
heavy nervous damages. Among these damages some would 
count the too rapid imposition of an education calculated to 
over-cultivate an introvert disposition, and ultimately to 
paralyse the will to apply the bodily organs to the active 

l Cf. Fox-Lane Pitt-Rivers, The Clash of Culture and the Contact 
of Races. 


STANDARDS OF CONSUMPTION 


337 


handling of the physical environment, for which ‘purpose’ 
they were created. But be this as it may, there are manifest 
dangers in all methods of reforming or enlarging the stand¬ 
ards of consumption which do not take due account of the 
organic nature of these standards. For only thus can life 
be made safer, fuller, and more enjoyable. 

§ 17. Thus by a long circuitous route we come back to 
our opening thesis / that economics is maimed for contribu¬ 
tion to the art of human welfare by its virtual neglect of 
any scientific study of consumption. So far as consumption 
is brought under survey in most economic treatises, it is 
envisaged in standards of living, or standards of comfort. 
It is, indeed, significant that these two terms should be 
treated as synonymous, still more significant that comfort 
should be externalised in comforts mainly, if not wholly, of 
material composition. This perhaps is inevitable so long 
as wealth itself is realised in terms of money and the material 
goods it can purchase. But even when a more liberal view 
of wealth and consumption is taken, which includes leisure, 
education, and other non-material values involving economic 
expenditure, the essential difficulty still remains, that of 
assessing the welfare of an economic standard without refer¬ 
ence to the organic human standard in which it is incorpo¬ 
rated. For every alteration in an economic standard, as by 
the addition or elimination of some constituent of consump¬ 
tion, not only affects other economic elements in consump¬ 
tion, but the non-economic elements also. The simplest 
illustrations in recent times are prohibition and the rise of 
the automobile in America. Economists have made some 
interesting studies into the effects of both changes upon the 
family budgets of various classes of the community, showing 
the organic interactions between different constituents in 
standards of consumption. But the record of these changes 
is necessarily confined to the welfare expressed in budgets, 
whereas the organic complexes of satisfaction or welfare 


338 


STANDARDS OF CONSUMPTION 


affected by these changes far transcends the economic seg¬ 
ment. It is likely that the effects of the automobile, for 
good or evil, upon the general way of life, including the social 
institutions, politics, ethics, and the whole Weltanshauung 
of Americans, may be far more revolutionary than any 
changes recorded in budgets or in ‘comforts’. 

§ 18. This brings us back to our main position, the im¬ 
possibility of detaching economic from human satisfaction 
in the art of life. The economy of consumption brings out 
this teaching even more clearly than the economy of pro¬ 
duction, so far as the two are separable. For in consump¬ 
tion man is enabled, and indeed impelled, to preserve a more 
or less effective harmony of diverse activities, whereas in 
modern production he is commonly so specialised that his 
organic nature either disappears or puts up some feeble 
unavailing struggle on behalf of the atrophied activities. 
This specialisation of the producer for the supposed benefit 
of the consumer carries, however, two related dangers. The 
pace at which the modern technique and organisation of 
producing power enables and impels increased amounts and 
novel sorts of material goods to pass to the consumer tends 
greatly to exceed the power of the consumer to incorporate 
them serviceably in his standard of consumption. New half 
assimilated elements cause trouble and waste by disturbing 
the established harmony, while their strong successive at¬ 
traction and prestige keep the worker in close subjection to 
the routine economy which continually complicates his mode 
of living. When J. S. Mill lamented the fact that machinery 
had done nothing to lighten the burden of human toil, he 
ignored half the damage of machine tyranny. For uncon¬ 
trolled mechanical technique injures man in his capacity of 
consumer as much as in his capacity of producer. The 
worker tired by a monotonous day’s work cannot get full 
use out of the new standardised goods placed at his disposal, 
nor can he check or rectify the disturbing influence they 


STANDARDS OF CONSUMPTION 


339 


exercise upon his older standard. The stories told of the 
eccentricities and extravagances of the new rich, or of 
workers with a rapid rise of pay, well illustrate this aspect 
of the waste. Mechanical production can easily outrun 
organic consumption. Human energy, therefore, increas¬ 
ingly demands that half the power of mechanical production 
shall be applied, not to producing more goods but more 
leisure, that is to say, to so liberating the producer from the 
strain and burden of specialised production that he may 
become a skilled consumer, with leisure and energy enough 
at his free disposal to assimilate the slower gains of scien¬ 
tific production, instead of being overwhelmed by them, 
while at the same time bringing his harmonised economic 
standard of living into proper relations with the non¬ 
economic activities and satisfactions of his life. This seems 
impracticable so long as profiteering rules the economic 
system. For the profit-maker can only gain his end either 
by working his machines and his workers to their full capa¬ 
city, and turning out goods so rapidly that his skilled market¬ 
eers must induce the general body of workers to take their 
share in increased goods, not in increased leisure and other 
non-economic satisfactions, or by restrictions of output that 
give a wasteful or excessive leisure. Thus the humanist 
who regards the advance of civilisation and of personal well¬ 
being as requiring a diminishing volume of human interest 
and energy to be devoted to the economic functions, an in¬ 
creasing volume to the free arts of personal expression and 
enjoyment, will fasten upon the social control of the ma¬ 
chinery of production as an indispensable condition for 
enabling man as consumer to secure the leisure and liberty 
in which alone an art of life may flourish. 


CHAPTER VI 

AN OPTIMUM POPULATION 

§ 1. The relation of wealth to welfare finds its deepest 
expression in the population question. For if, as Ruskin 
held, “There is no wealth but life”, the art and policy of eco¬ 
nomics must be governed by the consideration of how much 
life and what sorts of life are desirable. The callous fatal¬ 
ism, sometimes masquerading as Providence, sometimes as 
Nature, which led men to regard the processes of reproduc¬ 
tion as no proper or possible subject for human control, has in 
recent times given way to an increasing disposition to regu¬ 
late the growth and character of populations in acordance 
with considered policies. Three areas of interest have dis¬ 
closed themselves, the narrow interest of the family, the 
wider interest of the nation, and the general interest of man¬ 
kind upon the habitable earth. Since reproduction is 
directly regulated by the parents, the wider interests of a 
nation or mankind can only be implemented by influencing 
the family. The dominant feature in the modern situation, 
birth-control, is essentially a private policy of the family. 
It cannot for a moment be pretended that considerations of 
national policy, relating to the density or the quality of 
the population of the country, weigh appreciably with par¬ 
ents in determining how many children they will have. If 
a nation desires to check or stimulate, or to select, its popu¬ 
lation, it must bring material or moral influences to bear on 
parents. Parentage may be preached as a patriotic duty, 
or encouraged by bonuses or tax remissions: the economic 
burden of child nurture may be lightened by family allow- 
340 


AN OPTIMUM POPULATION 


341 


ances, free schooling, free meals, and other communal 
services. On the other hand, assisted emigration may relieve 
congestion and help to portion out the world’s population 
in accordance with economic opportunities. These national 
controls, however, are of small significance in comparison 
with the particular interests of the family in the rate of 
reproduction. As for a world-population policy, even re¬ 
garded purely quantitatively as a rationing of population 
for the best exploitation and utilisation of national resources, 
it is in its infancy. For though considerations of private 
gain promote a distribution of labour power throughout the 
world with some regard to economic opportunities, political, 
racial, linguistic, climatic, and other barriers, taken in con¬ 
junction with the short-range and wasteful exploitation 
which commonly serve the profiteering purpose, afford a 
poor basis for sound distribution of world population. 

§ 2. If, therefore, we accept the modern term ‘optimum 
density’ for our starting point in applying a criterion of 
human values to the population question, we had best begin 
with the narrow area of the home. We then perceive at 
once the invalidity of attempting to treat the population 
problem as a purely, or a distinctively, economic problem. 
For the blend of economic and non-economic motives which 
regulates the size of the family under birth-control is evident. 
Indeed, we recognise at once that ‘optimum density’ has a 
qualitative as well as a quantitative significance. With 
parental birth-control it is not merely a question of how many 
children but of the sort of nurture, education, and other 
opportunities that affect the quality of life. Yet there is 
evidently a sense in which economic considerations, and 
even spatial considerations are fundamental. In agricul¬ 
tural communities the adequacy of the family for the effi¬ 
cient working of the farm, and, reciprocally, the sufficiency of 
the farm for the support of the family, have a determinant 
influence upon the age of marriage and the number of 


342 


AN OPTIMUM POPULATION 


children. The general adoption of rigorous birth-control 
among the French peasantry is notoriously due to legal and 
economic limitations of landed property. Even among 
town-workers “the niggardliness of nature” has its indirect 
effect in limiting the family through its action on ‘the housing 
problem.’ The congestion of city areas is an intensive 
example of the part played by land in the control of popu¬ 
lation. But other considerations, largely economic, are more 
potent factors in birth-control as exercised by the industrial 
and professional families in most Western nations. The 
dispacement of the idea of a customary standard of living 
by the idea of a progressive standard of comfort in most 
modern parents is probably the strongest conscious factor 
in limiting the family. For the extra cost of each child is 
a manifest check upon the rise of a standard when conditions 
of the labour-market make it possible. Now that in one 
civilised country after another legal and social restrictions 
are put upon the early employment of children in wage¬ 
earning occupations, this check is more effective, for each 
child remains a longer burden on the family purse. Closely 
linked with this check are the influences that proceed from 
the new social, educational, and economic status of woman. 
Her new position, legal, economic, and political, impel and 
enable her to regulate the amount of maternity to which she 
shall be subjected. Birth-control is to a large extent a revolt 
against an otherwise excessive motherhood, excessive, partly, 
in its direct form as child-bearing, partly, in the narrowing of 
human personality due to absorption in child nurture and 
the close confinement to the home involved in bringing up 
a large family. The emancipation of woman in body and 
in mind is probably in some ways the most revolutionary 
movement of the age, as it operates upon the size and char¬ 
acter of the family. For, as woman comes with ever clearer 
consciousness to realise the obligations of maternity, her 
instinctive aptitude for the rearing and education of the 


AN OPTIMUM POPULATION 


343 


young, fortified by trained understanding and larger author¬ 
ity in the home and the community, will give her the para¬ 
mount influence in moulding child life. As women are no 
longer forced into marriage and maternity for a livelihood 
and occupation, the less marriageable and maternal types 
of women will remain single. Thus marriage itself as sex- 
union will gain, and a limited but willing maternity will con¬ 
tribute to higher skill in child nurture and a happier home 
life. There will be better and fewer children. 

§ 3. Thus the population question in its narrowest form 
shows, firstly, how intimately the quantitative and the quali¬ 
tative aspects are related, and, secondly, how the economic 
factors are merged with other non-economic factors, alike 
as causal determinants of birth-regulation and as results. 
The ‘optimum population’ comprising a family will vary, 
partly with the strength of the parental, especially the ma¬ 
ternal, instincts; partly, with the health, economic strength 
and confidence, the occupation, social and extra-domestic 
interests of the parents, and not a little with the climate 
and physical environment. In this use of the term ‘optimum’ 
we must, however, bear in mind the limitations of its appli¬ 
cation to express the actual valuations of parents. How far 
the desired conforms to the desirable, must here, as in all 
other problems of welfare, remain a matter of controversy. 
Though there may be strong grounds for holding that parents 
may be persuaded to know their true interests and to follow 
them in this vital matter, doubts may still remain as to 
whether the motives of birth-control take due consideration 
of the more distant interests. Family affection, and the 
interests and activities attached to it, play an important 
part in most men’s lives, and as they grow older this attach¬ 
ment to a younger and more active generation that is near 
and dear to them goes far to maintain the zest and savour 
of life. A childless or a one-child marriage incurs the risk 
of an old age of emotional poverty that is likely to be under- 


344 


AN OPTIMUM POPULATION 


estimated in the prime of life. A larger family circle is, in 
spite of all that cynics say, a better school of character and 
of experience than a small one, and furnishes more fruitful 
contacts with wider ranges of society. ‘But is not this a 
selfish view’, the rigorous restrictionist may urge, ‘which 
subordinates the interests of the progeny and of society at 
large to the emotional needs of parents?’ Here, however, 
opens an issue of strictly vital significance to every applica¬ 
tion of the concept of ‘optimum population’. If human life 
be rightly held to contain normally a surplus of happiness, 
satisfaction, welfare, or whatever term for the desirable we 
may prefer, then the presumption is in favour of more lives, 
unless the increase causes a more than proportionate risk or 
damage to existing lives. The issue is best discussed when 
we come to consider the wider application of ‘optimum popu¬ 
lation’. I raise it here as a passing demurrer to the assump¬ 
tion that the desires and interests of potential parents are 
the sufficient basis for a right determination of the size of 
the family. It does not, of course, settle, but expressly 
leaves unsettled, the question whether the economic and 
human resources of parents enable them to do so much better 
for a few than for many children that there is a true net 
economy of welfare in the small family. I suggest, however, 
that the value of life per se is liable to be left out of the 
computation, when the narrower application of the ‘optimum’ 
principle is applied within the family area. 

§ 4. Granting that the progeny is the main consideration 
in the parental outlook of the population question, we must 
next consider how far this standpoint and policy harmonise, 
or can be made to harmonise, with the wider interests of 
the nation or mankind. 

The wider conception of optimum density is concerned 
with the right rate of growth of the population on an area 
of land, whether it be a single country or the habitable world. 
I prefer to pose the problem in terms of ‘rate of growth’ 


AN OPTIMUM POPULATION 


345 


instead of mere size of population, because this presentation 
is more relevant to the actual conditions of * an age when in 
nearly all countries there is a growth both of population and 
of the productivity of industries. Moreover, Malthus was 
right in setting his problem in terms of comparative pace, 
though he had no justification for distinguishing the ‘geo¬ 
metric’ ratio of the growth of population from the ‘arith¬ 
metic’ ratio of the growth of food supplies. 

Given an increasing measure of birth-control, the direc¬ 
tion and pace of which are mainly determined by economic 
factors, or standard of living, and constant progress in the 
arts of industry, the ‘optimum population’ will be a moving 
figure that will give the highest income per head. 

Most of the exponents of this ‘optimum’ have severed 
themselves entirely from the subsistence basis and the 
special application of the Law of Diminishing Returns to 
agriculture which was adduced to support it. It is common 
ground that, not only for humanists but for economists, a 
bare subsistence and a law, even more malleable than ‘iron’, 
securing it, are worthless as operative principles in modern 
society. In discussing the desirable size or growth of popu¬ 
lation our first assumption must be that of the best average 
livelihood as expressed in economic goods. It will also be 
generally agreed that the rigorous distinction made between 
agriculture, as subject to a Law of Diminishing Returns, and 
manufacture to a Law of Increasing Returns, cannot be 
maintained. For taking a present view of the economy of 
any business, agricultural or manufacturing, there is always 
a limit beyond which further application of capital and 
labour will be uneconomical. 

For any sort of production in its particular environment 
there are one or more types of business, best in size and struc¬ 
ture, and further immediate enlargement of which is wasteful. 
That is all the Law of Diminishing Returns signifies, a static 
expression of human economy in general. But there is a 


346 


AN OPTIMUM POPULATION 


tendency for the optimists of population, in protesting against 
the excesses of -the older economic antithesis and the static 
conception on which it rested, to ignore the not unimportant 
element of truth in the contrast of agriculture and manu¬ 
facture. This applies to such a statement as that of Dr. 
Cannan when he writes, “At any given time, or, what comes 
to the same thing, knowledge and circumstances remaining 
the same, there is what may be called a maximum return, 
when the amount of labour is such that both an increase and 
a decrease in it would diminish proportionate returns. . . . 
If we suppose all the difficulties about the measurements of 
the returns to all industries taken together to be somehow 
overcome, we can see that at any given time, or knowledge 
and circumstances remaining the same, just as there is a 
point of maximum return in each industry, so there must 
be in all industries taken together. If the population is not 
large enough to bring all returns up to this point, returns 
will be less than they might be, and the remedy is increase 
of population; if, on the other hand, population is so great 
that the point has been passed, returns are again less than 
they might be, and the remedy is decrease in population.” 1 

§ 5. The special character of food production is denied 
by this policy of lumping together all sorts of products for 
the estimate of a maximum return on which to base the 
‘optimum population.’ Professor Carr Saunders puts it in 
a quite uncompromising way. “This idea of an optimum 
density of population is wholly different to that put forward 
by Malthus. To him the problem was one of the relative 
increase of population and of food; with us it is one of the 
density of population and the productiveness of industry.” 2 
“There is a particular density of population which must be 
reached and must not be exceeded if the largest possible 
income per head is to be obtained.” Or, again, Mr. Lionel 

1 Wealth, p. 68. 

2 The Population Problem, p. 201. 


AN OPTIMUM POPULATION 


347 


Robbins says, “The optimum is not a fodder optimum. It 
has nothing to do with subsistence. On the modern theory 
an area is over-populated when total returns per head are 
less than they would be if the population were a little smaller, 
and this is a point which may be reached long before there 
is any question of pressure on the means of subsistence.” 1 

But are we justified in taking “the productiveness of in¬ 
dustry” and “the returns of all industries taken together” 
as the criterion of optimum density, without consideration of 
the differences in the pressure of the Law of Diminishing 
Returns to the various industries thus “taken together” ? 
In estimating “the largest income per head” is it a matter 
of complete indifference how that income is composed, i.e., in 
what proportion food and fuel figure, as compared with 
manufactured goods? Suppose that, by means of an in¬ 
creased population set to factory work, the total income per 
head were increased, a smaller quantity of food per head 
being more than offset by the increased quantity of motor 
cars, watches, and drugs, would this total increase of income 
per head justify a higher density of population? 

Such a contention can only be sustained by showing that 
all industries are equally subject to “the law of diminishing 
returns”. Is this the underlying assumption of our ‘opti¬ 
mists’ and is it capable of proof? There is undoubtedly 
much reason for believing that modern chemistry and bac¬ 
teriology, as applied to agriculture, can do much to increase 
the absolute and the differential fertility of the soil for 
the production of many foods and raw materials. But can 
it be maintained of agriculture as a whole that its increase 
of productivity per unit of applied labour, or per head of 
the population, has been, or is likely to be, as rapid as in the 
staple standardised manufactures which form so large and 
increasing a proportion of our real income? 

There are two sets of difficulties in applying to agriculture, 

1 “The Optimum Theory of Population.” (Economica, 1927, p. 120. 


348 


AN OPTIMUM POPULATION 


and indeed to other extractive processes, the full economics 
of power-driven machinery, the standardisation and speciali¬ 
sation which are the main sources of enlarged productivity 
in the processes of manufacture and transport. The first 
set is physical, the almost infinite local variations in the 
chemistry of soil, in situations, levels, climate, weather, and 
the flora and fauna which are the raw products of agricul¬ 
ture. Though there are in some countries, such as parts of 
Central Asia, Argentina, Canada, and sections of the Middle 
States of America, large tracts of land so uniform in character 
that machine-economy can be applied to them with great 
advantage, even in such cases the uniformity of the soil 
in texture, contents, situation, is broken by so many minor 
irregularities that it can not compare with the carefully 
graded materials to which most manufacturing processes 
are applied. And such large plains or steppes form but a 
small part of the cultivable surface of the earth. The high 
economies of standardised production, obtained in modern 
large-scale manufactures, are applicable in a very low degree 
to most farming processes. Nor is it likely that these limita¬ 
tions can be so fully compensated by cheap nitrates and 
other fertilisers, or by Mendelian and other biological dis¬ 
coveries, as to set agriculture as a whole upon the same pace 
of increasing productivity as obtains in the great industries. 

The other set of difficulties is human, connected with the 
nature, habits, interests, and temperaments of the great 
agricultural populations. The slowness with which improve¬ 
ments in agricultural machinery, in rotations of crops, cross¬ 
ing and breeding, and the skilled observation and records 
needed to convert farming into a reliable business, have made 
way, even in civilised countries, renders it extremely hazard¬ 
ous to compute scientific contributions at anything like their 
full value in the actual conduct of agriculture. A narrow, 
dogged conservatism, a refusal to learn, to think, and to 
experiment, or to cooperate with neighbours even for the 


AN OPTIMUM POPULATION 


349 


most obvious material advantages, accompanied by a deep 
suspicion of city-folk and any notions that come from them, 
prevalent among the farmers and peasantry in almost all 
countries, has an intimate bearing upon the operation of the 
law of diminishing returns, which is no doubt in its ultimate 
basis more psychological than physical. Its operation 
hinges more on the stupidity of man than on the “niggard¬ 
liness of nature”. 

§ 6. Bearing in mind these practical considerations, we 
can not assent to a treatment of ‘optimum density’ that pools 
all sorts of products as equally affected by the law of dimin¬ 
ishing returns. This judgment is supported by the statistics 
of price-changes during the modern period, which show a 
general tendency for agricultural produce to exchange on 
favourable terms with the products of manufacturing indus¬ 
tries. The rate of food production must even now be re¬ 
garded as the limiting factor for ‘optimum density/ if a 
purely physical-vital interpretation be given to that term. 
There are, however, other difficulties in regarding “total 
income” as the test. How is income to be estimated? Dr. 
Cannan is evidently uncomfortable in his formulation of the 
optimum principle. For he qualifies his statement by the 
words, “If we suppose all the difficulties about the measure¬ 
ments of returns to all industries taken together to be some¬ 
how overcome” etc. But how overcome? To apply “the 
measuring rod of money” clearly will not serve. For we 
cannot correlate money income with the real income which 
is alone relevant for an ‘optimum’. A bad harvest, or a 
restricted output of industry, may not, usually does not, 
signify any corresponding loss of money income, either for 
the sellers of the short supplies, or for the community, though 
representing a serious damage in real income per head of 
the population. 

If, again, we take ‘real income’, we are still in difficulties. 
Take the case of two isolated economic areas, one with 


350 


AN OPTIMUM POPULATION 


richer natural resources, the other more highly developed 
in the industrial arts. If the real income per head of the 
population were equal in the two areas, there is no reason 
to suppose that the optimum density would be equal. The 
ampler supply of foods and raw materials in the one case 
might validate a higher density of population than in the 
other, a larger proportion of the higher population being 
devoted to the industrial arts operated on a lower level. 
Thus the real income in the two areas would be equal, but 
the populational density would be different. Or, putting 
the case conversely, if the populational density were equal 
in the two cases, the real income per head would be different. 
Granting that in industry, as in agriculture, the law of 
diminishing returns is operative, its more tardy operation 
in a fertile country will affect the optimum density, making 
it possible to support a larger population at a given real in¬ 
come than in a less fertile country. In other words, the com¬ 
position of the real income is a relevant consideration in 
determining the optimum. 

Not less important, of course, is the question of the dis¬ 
tribution of the real income, in determining the optimum 
density. Where a large proportion of the real income is 
consumed by a small minority in luxurious goods and services, 
the optimum density will be lower than where the same 
volume of real income is evenly distributed, a larger pro¬ 
portion of it taking the shape of a higher general standard 
of physical comforts. The ‘total income’ of a country, or 
the average income per head cannot settle the optimum 
density, without regard to the distribution of the income. 

Again in giving a human valuation to any given ‘real 
income’, we ought to take due account of the conditions of 
producing it, its human costs, as well as of the utility of 
consuming it. This has an obvious bearing upon optimum 
density. For of two equal total real incomes one may be 
produced under much lighter, more interesting, more enjoy- 


AN OPTIMUM POPULATION 


351 


able conditions, than the other, making the subjective values 
of the two very unequal. Should not this affect populational 
density? Will not these preferable conditions of production 
validate a larger population, living at a somewhat lower 
average of objective income? Most workers would prefer a 
somewhat smaller income, if it could be earned by lighter and 
more agreeable work under conditions of greater personal 
freedom. A larger population working on such a basis might 
earn a lower average income, as estimated in money, or in 
objective products, but it would be compensated and raised 
to a higher subjective level by its reduced human ‘costs’ of 
production. 

§ 7. Hitherto I have taken current valuations of produc¬ 
tion and consumption as the criterion. But if, as may be 
argued, actual current estimates and desires of men, though 
normally accordant with the ‘desirable’, are liable to short¬ 
sightedness and other defects, which fuller knowledge, wider 
outlooks, and longer perspectives may correct, this ‘total in¬ 
come’ or ‘average income’, upon which the optimum density 
depends, should be liable to this more intelligent readjust¬ 
ment. Doubts, as we have recognised, will arise as to the 
reliability of authorities claiming expertise in human valua¬ 
tions. But some corrections of current valuations are em¬ 
bodied in governmental controls and in enlightened public 
opinion, checking the free play of current desires by standards 
of the desirable. So far as public policy can be directed to 
secure an optimum density of population, the economic in¬ 
come taken as its test should be reckoned in terms of the 
real long-range benefits it contains in its production and 
consumption. 

§ 8. So far we have discussed optimum density on purely 
economic considerations. But since our organic standpoint 
obliges us to keep continually in mind the interaction of 
economic and non-economic activities, impulses, and values, 
it is evident that the problem of optimum density cannot, 


352 


AN OPTIMUM POPULATION 


even as a quantitative problem, be solved on the most en¬ 
lightened treatment of purely economic income. This, in¬ 
deed, is recognised by Carr Saunders, as a necessary deduc¬ 
tion from his rejection of food production as a natural check. 
“There does not seem to be any reason for supposing that 
there is any limit to the increase of skill in the production 
of food, and that, therefore, there is any limit to the desirable 
number so long as the criterion remains economic. This 
suggests that at some period mankind will have to introduce 
another method of estimating what density is desirable, as 
it is clear that the economic advantages of increase some¬ 
where come into conflict with other ideals as to desirable 
social conditions. In other words, a larger income would 
not be worth while having if it necessitated too large a 
population.” 1 

What are these non-economic considerations? Such con¬ 
gestion of population as is to-day presented in Belgium or 
in South Lancashire may be considered detrimental to phy¬ 
sical and moral health. If a certain reasonable level of 
economic comfort and security has been attained, the de¬ 
mands of a free personality will turn more urgently to fresh 
air, scenery, elbow room, and privacy, contacts with wilder 
nature, as vital contributions to a satisfactory life. His 
larger leisure and liberty from economic tasks will lead to 
more and more stress upon these non-economic factors. 
The probably impending dispersion of great city populations, 
owing to improved facilities of rapid transport and of the 
distribution of industrial power, must at no distant time raise 
residential planning into a matter of first-rate consideration. 
For every dispersion of congested centres will otherwise re¬ 
duce larger and larger areas to semi-congested conditions, 
narrowing the area of true country. 

Such considerations may dispose us to accept a lower 
density than mere considerations of maximum economic in- 
1 Op. cit., p. 309. 


AN OPTIMUM POPULATION 


353 


come would warrant. But here another issue, to which brief 
reference has already been made, comes up. The human 
value attributed to life per se must have some effect upon 
our view of the optimum density. If we hold life in itself 
desirable, containing a surplus of desirable over undesirable 
consciousness, a net income of happiness, then the more lives 
the better, unless the greater density reduces the value of 
the average life so much as to produce a smaller aggregate 
income of happiness. Here there is, of course, much ground 
for divergent estimates. To the optimist, life, as such, has 
great value: to the pessimist, little. Besides, the same 
person’s valuation of life for himself and for others will vary 
with varying conditions of age, health, knowledge. But 
though valuations may differ widely, there is, I think, a 
general agreement that life, as such, is desirable, and must 
be taken as possessing under average conditions a surplus 
of satisfaction or happiness. The fact that nearly every¬ 
one prefers to go on living must be taken as strong corrobora¬ 
tive testimony to this position. We may, therefore, hold 
that unless the greater density, either by restriction of 
physical subsistence, impairing of health, or damage to the 
enjoyment of seclusion and scenery, seriously lowers the 
value of the average life, there is a presumption in favour 
of a population that may exceed the optimum density as 
measured in terms of average economic income. 

§ 9. But this attribution of value to life as such necessarily 
introduces considerations relating to kinds or qualities of 
life, not confined to the mere reactions of density upon life- 
value. Here we enter the controversies relating to the vir¬ 
tues or values of different stocks and social or economic 
grades within national areas, and the worth to themselves 
and to mankind of the different races and types of human 
life among the population of the world. While I have no 
claim and no intention to enter the arena of this tangled 
controversy, and pronounce upon the relative importance 


354 


AN OPTIMUM POPULATION 


of inborn qualities and environment in determining the 
values of a human personality or a community, it is evident 
that judgments upon this issue are highly relevant to any 
policies that are adopted either by individual parents or 
by collective action for the regulation of the growth of popu¬ 
lation. They will also necessarily have an important bear¬ 
ing upon our estimate of economic measures relating alike 
to the production, the distribution, and the consumption of 
wealth. For, if we hold that certain strains or stocks within 
a nation or a race are, in virtue of inherited characters, more 
valuable to mankind and to themselves than others, we shall 
favour economic and other policies which encourage repro¬ 
duction from such strains or stocks, securing to them ampler 
opportunities than are afforded to less desirable strains or 
stocks. Similarly, so far as any world-policy emerges from 
the growing solidarity of international relations, it would en¬ 
courage the survival and growth of peoples or races who were 
held to be more capable of advance in the arts of civilisation 
and of taking a useful part in the development of the natural 
resources of the earth lying within their direct sphere of 
activity. 

Such policy, administered, as is not unlikely, from an ex¬ 
cessive regard to early economic exploitation, would by no 
means necessarily imply an encouragement of higher or 
intrinsically ‘fitter’ humanity. It might mean the stimula¬ 
tion of submissive types of man, physically and mentally 
adapted to servile labours under superior employers, rather 
than of higher and more independent types. The Negro 
might be preferred to the Indian in America, the more de¬ 
pressed Bantu tribes to the Basutos or the Zulus in South 
Africa. The idea of a deliberate policy of rationing the 
population in the various backward portions of the earth, 
by some central international authority concerned primarily 
with the conservation and development of the world’s natural 
resources of oil, coal, rubber, iron, cotton, food-stuffs, and 


AN OPTIMUM POPULATION 


355 


other supplies for the world-markets, may seem too remote 
from present possibilities to deserve any consideration. But 
there is ample evidence of the effects of purely economic 
policies, wielded by financial and industrial interests for 
short-range business ends, in determining the growth of the 
decline of populations in backward countries under their 
control without regard for what we must term the intrinsic 
values or happiness of the peoples affected. In organised 
slave-owning communities slave-population was stimulated 
with regard to the economic value of the slave as a forced 
labourer or a chattel in the market. In the various subter¬ 
fuges for slavery called ‘forced labour’ the greedy demand 
for immediate supplies of cheap workers often reacts in a 
lower birth rate, partly owing to removal of the adult males 
from their family or tribal life, partly owing to the unhealthy 
or dangerous conditions of the work to which they are set. 
This leads, as in Kenya and elsewhere, to a demand for some 
further “inducement, stimulus, or pressure” to be put upon 
the native tribes and families which had not responded to 
the earlier demands for wage-workers. Here once more we 
touch the large issue of the effects of white contacts with 
backward peoples. In many cases, as we recognise, both 
the economic pressure and other civilising influences are 
found to reduce, sometimes to exterminate, a native popu¬ 
lation, without regard to the capacities of happiness, or even 
the possibilities of progressive civilisation under good guid¬ 
ance, which such populations may possess. Such injuries 
are commonly due to a shortsighted selfish type of imperial¬ 
ism, in which the political as well as the economic control 
of native populations and their lands is undertaken by con¬ 
cessionaires, planters, and other business men engaged in 
the rapid exploitation of the natural resources of the country 
by workers whose sole value consists in the profitable toil 
that can be extracted from them by a combination of 
economic and political pressures. 


356 


AN OPTIMUM POPULATION 


The point of vital importance is that, whatever collective 
policies at present operate in determining the growth or 
decline and the selection of types of population in the back¬ 
ward parts of the world, predominance is exercised by busi¬ 
ness men for business purposes without proper regard to the 
welfare of the populations of these countries, or of that 
humanity of which they are constituent parts. Such quali¬ 
fications of this short-range economic control as are exer¬ 
cised by good-hearted officials or zealous missionaries are 
often so ineffective and so ill-directed as not seriously to 
temper the economic dominion. 

Yet, if men were rational beings fully alive to their real 
interests as members of a continuous human society, in occu¬ 
pation of an earth, whose resources not only of economic 
wealth but of the wider contents of human progress and 
happiness it was their duty to develop, they would regard 
as their largest and most important task the determination 
of the sorts and sizes of the populations of the different 
countries, so far as such determination of conduct, primarily 
performed by individual parents, could be made effective. 
They would seek from science and history, as well as from 
considerations of immediate utility, to come to some agree¬ 
ment as to the respective claims of inherent superiority, 
physical, intellectual, moral, aesthetic, put forward on be¬ 
half of the several races and nations, in order to know what 
types to encourage and what to discourage, having regard 
to climatic and other environmental factors, and the acquired 
adaptability of peoples for successful life in the country they 
have long occupied. The whole issue of assisted or impeded 
or directed emigration would be determined, not on lines 
of selfish nationalism or purely economic needs as now, but 
by considerations, partly economic, partly human, of the 
capacity of certain areas to support a larger population with 
advantage to the output of wealth and to the prosperity and 
happiness of the whole population thus enlarged, not ignoring 


AN OPTIMUM POPULATION 


357 


the question of the physical, social, and cultural assimilarity 
of the newcomers by the older population. Much might be 
urged as to the necessity of an internationalism working, 
however slowly, towards this idea of the right of mankind as 
a whole to determine what numbers and kinds of men shall 
occupy the different areas of the earth. Remote as this 
ideal may be from practical policy, it stands as one of the 
chief ultimate demands to be achieved, if man is to become 
the master of his destiny. It will not in the long run be 
possible for mankind to acquiesce in the obstructive policy 
of such a people as the Australians, who claim as an ex¬ 
clusive property vast tracts of territory of which they make 
and can make no effective occupation. Until recently gen¬ 
eral embargoes upon immigration into thinly populated 
countries have been rare, though racial discrimination of 
immigrants has long been practised. For the ruling classes 
in new countries have commonly found their economic in¬ 
terests served by liberal flows of outside labour. But, as 
organised labour within such countries has gained a larger 
measure of political influence, a more rigorous policy of 
exclusion, based upon shortsighted considerations of high 
money-wages, has impeded alike the development of their 
country, their own share in the great productivity (which a 
liberal immigration would have secured), and the increased 
contribution which would have been made to the economic 
prosperity of mankind. 

§ 10. There are, of course, in many instances sound social 
and political reasons for restricting the pace at which the 
less assimilable races or classes of would-be immigrants 
should be admitted. But the wholesale exclusion, on grounds 
of race or colour, of peoples who are often the most available 
and serviceable occupants of otherwise uncultivated and un- 
cultivable areas, is simply a selfish, unjust, and injurious 
assertion of a collective right of property by proprietors who 
cannot use their property themselves and will not let others 


358 


AN OPTIMUM POPULATION 


do so. This hard-shell nationalism, based partly upon short- 
range and fallacious economics, partly on racial prejudice 
and political timidity, is one of the greatest obstacles to the 
economic and the moral progress of mankind. Doubtful 
though it may remain whether international government 
can ever become strong enough and intelligent enough to 
assess the intrinsic human values of different types and races 
of mankind, so as to offer encouragement and assistance to 
the more desirable, and to direct the flows of desirable im¬ 
migration into channels most serviceable to the immigrants, 
the country they leave, the country they enter, and the world 
at large — nevertheless, modern humanists must work 
towards a goal whose attainment is essential for a peaceful 
and progressive future. 

Such a rationing of the population of the world on a joint 
basis of inherent human value and adaptability to life and 
work in particular environments, regarded even as a dim 
and distant possibility, implies an advance of the related 
sciences of eugenics and psychology almost beyond the 
dreams of present workers in these fields. Though the 
differences, physiological, psychical, and environmental, be¬ 
tween the populations of the West European countries are 
very small, as compared with their similarities, the tendency 
to stress these differences and to assign to them high values 
breeds the wildest generalisations regarding the essential 
characteristics of racial or national groups. Englishmen 
are phlegmatic, silently sentimental, practical, averse from 
logic, incurious of ideas, and so forth! Frenchmen are ex¬ 
citable, demonstrative, neat and precise in the arts of living, 
‘immoral’ in the English sense, realists and rationalists in 
political affairs! Germans are slower-witted, laborious in 
body and in mind, romantic, submissive to authority and 
organisation, clumsy mannered! Would it be possible for 
any Congress, however well chosen, to agree upon the element 
of truth that may underlie such generalisations, or upon the 


AN OPTIMUM POPULATION 


359 


human value of such special characters in their bearing upon 
policies affecting the constitution of the population of the 
world, such as birth-control and the course of immigration? 

§ 11. But, if such problems of qualitative population, 
racial and world eugenics, lie outside the present limits of 
useful consideration, the same judgment does not apply to 
problems of intranational eugenics. The State in its finan¬ 
cial policy, through tax allowances, family allowances, in¬ 
surance benefits, in expenditure on public health and housing, 
in immigration laws, public education, and the wider dissem¬ 
ination of knowledge of heredity and birth-control among 
various grades of the population, can do much to influence 
the birth rate and survival rate of the various economic and 
social classes or stocks in the nations. However much we 
may differ as to the respective importance of the influences 
of inheritance and nurture in the make-up of desirable in¬ 
habitants, and as to the composition of values in The desir¬ 
able’, nobody will deny that some desirable and undesirable 
characters, physical and mental, are transmitted by heredity. 
Everyone knows certain families whose physical and mental 
make-up, as attested by several generations, is markedly 
above the average, while other families exhibit consistently 
infirm qualities of body and mind, though nurtured in similar 
physical and social environments. In such cases we gener¬ 
ally recognise an intimate relation between physique and 
‘disposition’, including in the latter term most of the qualities 
that go to make temperament and character. Mr. Carr- 
Saunders, with some other psychologists, is disposed to regard 
disposition and temperament as more inheritable than the 
definitely intellectual powers. Even the ‘arrest’ of intellec¬ 
tual development, so often observed in the education of black 
peoples, he is disposed to regard as “not so much an inevi¬ 
table result as the coming into play of a particular tradition”, 
i.e., “the absorption at a certain age in practical matters, in 
tribal habits and customs, in sex and the settling down to a 


360 


AN OPTIMUM POPULATION 


normal married existence as much on the lines of their ances¬ 
tors as is possible under the altered conditions.” 1 

Against this view, however, we have a body of testimony 
from teachers, with opportunities of comparing the develop¬ 
ment of blacks and whites, or blacks and Amerindians, 
brought up together under similar physical and cultural 
surroundings. A certain quickness of memory and assimila¬ 
tive power in childhood is found among the blacks, but in 
concentration, reflection, and reasoning, they are inferior, 
and early puberty checks their general mental development. 
While it is generally admitted that mental characters are 
less closely determined by heredity than are physical charac¬ 
ters, the tendency among some psychologists to stress social 
heritage and tradition, as the main determinants of intellec¬ 
tual and even moral efficiency, cannot be maintained. For 
quite apart from the abrupt dualism in the relations of body 
and mind which it assumes, it ignores the fact that, for the 
individual, social inheritance and tradition, as indeed every 
environmental factor, are primarily opportunities of which 
the individual may avail himself with more or less success. 
And the aptitude for utilising these environmental oppor¬ 
tunities will depend mainly upon his inherited germinal 
constitution. In wresting a living from a raw physical en¬ 
vironment, not only the bodily strength and endurance 
needed are a germinal endowment, but the stimulus and 
capacity to acquire and use the various skills in handling 
the environment. Nor can one seriously doubt that the 
superior capacity to assimilate the common stock of knowl¬ 
edge and to use the instruments of the intellectual life 
depends upon the inheritance of a sound physical brain, 
and nervous, nutritive, and circulatory systems able to give 
it effective support. However highly we may estimate the 
heritage of knowledge, skills, language, traditional culture, 
institutions, and environmental changes, that together form 
1 Op. cit., pp. 397-8. 


AN OPTIMUM POPULATION 


361 


the corpus of civilisation, we must not forget that the effec¬ 
tive utilisation of these opportunities depends upon the 
physical inheritance of men. In fact the larger and the more 
various and complex this social heritage, the greater the need 
for a population whose sound but diverse strains and stocks 
are accommodated to the fullest use of such a heritage. A 
signal disservice is rendered by educationalists who main¬ 
tain that differences of germinal constitution count for little, 
nurture and training for almost everything. 

No doubt it is true that the great work of germinal selec¬ 
tion and changes has taken place in the remote ancestral 
past, and that most practical work towards the improvement 
of the human lot lies in environmental changes. But, even 
in the interest of securing and utilising these environmental 
changes, we ought not to rule out such rational selection of 
stocks as may preserve as far as possible the qualities of 
energy, enterprise, initiative, and cooperation which are 
prime conditions of social progress. 

§ 12. In order to pose the qualitative problem of popula¬ 
tion in its sharpest outlines, let us take the imaginary case 
of a eugenic despot in a position to regulate absolutely the 
marriages and birth rates of the whole population subject 
to his rule, and concerned to exercise his power for the good 
of the community. The problems would range themselves 
to his mind in the following order. 

First, he would form in his mind some image of the com¬ 
position of a sound well-working community as an organised 
whole, this composition implying a cooperation of groups of 
persons performing different functions. Each person would 
be conceived as a trinity; that is to say, first in his funda¬ 
mental structure and outfit, physical and mental, he must 
resemble closely all the other persons of the community. 
For without this common character there could be no com¬ 
munity. Next, he must be conceived as a member of some 
group undertaking some special function in the corporate 


362 


AN OPTIMUM POPULATION 


life, by virtue of his having certain aptitudes or qualities 
favourable to participation in this sort of work and the sort 
of life affected by it. Lastly, he must be conceived within 
this group as a unique personality with capacities of activity 
and enjoyment, which, so far as realisable, may not only give 
fuller expression to what is ‘in him 7 , but may enrich the life 
of the community by creative leadership. Having thus got 
in his mind this image of the place of persons and of groups 
in the community, our despot would have to consider what 
types of ‘character’, physical and mental, he would like to 
produce for membership in his community, and in what pro¬ 
portions. 

Then, having due regard to the three sorts of values in 
his members, he would have to consider how far the desirable 
qualities or characters, physical and mental, were inborn and 
could be favourably affected by selected parentage. Firstly, 
he would have to decide what sorts of unions could yield in 
offspring the desired results. How far the possession of 
the fullest knowledge at present available would be able to 
secure for him a reasonable amount of success in his eu¬ 
genic project, I leave to the judgment of those best qualified 
to judge. It would probably be held that if, like Frederick 
the First of Prussia, he sought to produce physical giants, 
selected unions might give him what he wanted, and that 
certain other distinctively physical types might be encour¬ 
aged or discouraged. But though mental character may be 
directly dependent upon physical character, the correlations 
between the two remain so obscure that the same success 
even as regards the more general characters of will, intelli¬ 
gence, and temperament could not be expected. Intellectual 
giants could not be bred with anything like the success in 
breeding physical giants, and for the finer and more complex 
qualities of mind and morals, so far as they are deemed 
inheritable, the experiments would be still more hazardous. 

§ 13. For any existing, or reasonably possible community, 


AN OPTIMUM POPULATION 


363 


the qualitative population problem is even more difficult, 
both as to the sorts of beings that are ‘desirable’, and as to 
the methods of securing them. There would, we suppose, be 
a pretty general agreement upon certain factors of physique, 
intelligence, and temperament that were desirable, and a 
much closer agreement upon certain other factors that were 
undesirable. For there is truth in Dean Inge’s aphorism, 
“We don’t know what sort of people we want, but we do know 
what sort of people we don’t want”. 1 But it would perhaps 
be more true to say that we know more about the parentage 
and other conditions which give us the people we don’t want, 
than we know about those which give the people we do want. 
This at any rate applies to the extremes of the desirable and 
undesirable. We do know something about the parentage 
and environment that will give us cretins, morons, syphilitics, 
criminals, drunkards, and other definite types of physical 
and moral weaklings, and in some of these classes parentage 
appears to be of paramount importance, while in the others, 
where environmental conditions appear to count heavily, the 
instability of temperament and lack of resisting power which 
make them count must be attributed mainly to heredity. 
We do not know anything like as much about the condition, 
parental or environmental, that will give us geniuses, philoso¬ 
phers, saints, or even great film-actors or baseball players. 
It is easier to cross for cretins than for saints and inventors. 
The ways of genius are notoriously wayward. The wind 
bloweth where it listeth! While, however, we cannot do 
much to arrange the parentage for genius or high talents, we 
can do a good deal to enable inborn genius or talent to dis¬ 
cover and assert itself. A wisely directed community might 
go a little further. Recognising that certain families had 
revealed some highly serviceable characters as germinally 
dominant, they might educate a sense of obligation to trans¬ 
mit the strain. An enlightened public opinion might enforce 
1 Outspoken Essays. 


364 


AN OPTIMUM POPULATION 


this obligation, and, where necessary, out of public funds 
for the endowment of genius, remove the merely economic 
obstacles which encourage celibacy and birth limitation. 
Considering how much the growth of the higher arts of civili¬ 
sation owes to the conspicuous talents of a few, it should not 
be deemed impossible to devise methods of conserving par¬ 
ticularly valuable strains that by several generations’ experi¬ 
ence have established their dominant character. Most 
eugenists appear, however, to concentrate attention mainly 
upon the elimination of definitely bad stock, by the prohibi¬ 
tion or discouragement of marriage and reproduction. Here 
among the educated classes the spread of knowledge and the 
pressure of enlightened public opinion ought to be, and are, 
increasingly effective checks. But, in proportion as the 
stocks it is desirable to eliminate are, partly by the social 
defects that attach to them, most prevalent among the lower 
social and economic strata of the population, the difficulty 
of reaching them by moral suasion is greatly enhanced. It 
is also held that some of the worst defects are physically con¬ 
nected with high fertility, while in the lowest social strata 
the general insecurity of livelihood engenders a self-protec¬ 
tive recklessness that manifests itself in promiscuous unions 
and unconsidered parentage. Under the more humanitarian 
policies of our time, the survival rate of the fruits of such 
undesirable unions is raised, to the physical and moral detri¬ 
ment of the population as a whole. Some progress is made 
in the removal of certain types of physical, intellectual, and 
moral defectives from free association and transmission of 
offspring, but the high fertility of large bodies of definitely 
inferior stocks remains a drag upon the progress of society. 
This judgment one may form without endorsing the hasty 
opinions of differential class-values which infect some eu¬ 
genic arguments. The disposition to take the existing 
social-economic strata as reliable indices of human values is 
perhaps natural enough among students belonging to the 


AN OPTIMUM POPULATION 


365 


higher strata. Some eugenists adduce the higher birth rate, 
and, under modern humanitarian regulations, the higher sur¬ 
vival rate, of the lower grades of our city populations as a 
dangerous dysgenic tendency leading inevitably to national 
degeneration. This interpretation of the statistics of birth 
rate in the different social-economic strata rests, however, 
upon two assumptions, neither of which has the validity 
attributed to it. The first is the assumption that success in 
achieving a high pecuniary status by one’s personal efforts, 
or in maintaining such a status achieved by one’s ancestry, 
is a guarantee of a socially desirable character. This naive 
psychology is that of Jack Horner who “put in his thumb and 
pulled out a plum and said ‘What a good boy am I’ ”. 

§ 14. That some personal qualities contributing to suc¬ 
cess in the modern commercial or professional world are so¬ 
cially desirable is indisputable. Sound health, capacity of 
concentration, quickness of response, memory of facts and 
persons, reasoning in practical affairs, strong will, ‘common 
honesty’, courage in emergencies, tact in handling men, cer¬ 
tain powers of imagination and ‘intuition’ in reading situa¬ 
tions, rank high among these qualities. Few of them belong 
to the higher or finer spheres of the intellectual or moral life, 
at least in their serviceable business applications. Some men 
of great intellectual or creative gifts have made money: great 
pecuniary success in the higher professions commonly implies 
an intellect above the ordinary level. But though a few 
magnates of finance, industry, or commerce show capacities 
of reasoning, imagination, and will far above the ordinary, 
normal success in business, or even in the professions, seldom 
attests high intellectual or moral qualities. Among the 
characteristics leading to success the more important belong, 
as Mr. Carr-Saunders well points out, to the temperament 
and disposition. 

“Among the temperamental characteristics leading to suc¬ 
cess we may note low degree of fatiguability, high power of 


366 


AN OPTIMUM POPULATION 


recuperation, rapidity of response, hopeful nature, vigour, 
energy and healthy nervous tone. Among the character¬ 
istics of disposition we may note similarly the instincts of 
self-assertion, of emulation and of acquisition.” 1 

Now most of these characters must be deemed to be 
‘desirable’, in the social as well as the individual sense. But 
not all. Self-assertion, acquisition, and the related desire to 
dominate, frequently impel conduct that is socially unde¬ 
sirable. Other qualities of temperament and disposition 
promoting individual success are definitely anti-social. By 
common consent, a certain ruthlessness and callousness to the 
interests of other business men and the community, a will¬ 
ingness to sacrifice those finer codes of ethics that exceed the 
bounds of ‘common honesty’, a cunning of concealment and 
of strategy, are eminently conducive to business success. 
Nor can we ignore the fact that definite dishonesty, some¬ 
times associated with illegality, and a gambling tempera¬ 
ment may under certain circumstances be conducive to 
success. So far as it is possible to generalise upon the mod¬ 
ern economic situation, we might say that the physical, in¬ 
tellectual, and moral factors in an unimpeded instinct of self- 
assertion through acquisition are the main determinants of 
that success upon which our eugenists have staked their 
case. Now, as we see, a separate consideration of these 
factors shows some to be socially desirable, others not, and 
there is no criterion for judging which contribute most to 
economic success. We may say, however, that the normally 
successful business man, taken in his total make-up, is not 
an obviously desirable type from the standpoint of high 
social serviceability. Great sensitiveness of feeling and 
disinterested intellectual activity are precluded from his 
character as being positively detrimental to success, while 
there is little if any place for the cultivation and display of 
the higher and more refined activities of the intellect. 

1 Op. cit., p. 471. 


AN OPTIMUM POPULATION 


367 


The other assumption upon which the eugenic test of com¬ 
parative class birth rates is based, is that generations of selec¬ 
tion have drawn from the general body of the population 
those stocks possessing the germinal aptitudes for pecuniary 
success, leaving the legitimate presumption that ‘The poor 
in the loomp is bad”. This presumption, however, supposes 
a degree of equality of opportunity and a liberty of move¬ 
ment for which the facts of the case give little warrant. It 
may, indeed, be said that the lure of great city life has for 
some centuries been draining the ‘home counties' in England 
of the abler, more energetic and adventurous stocks, to feed 
the population of London, and that the same is true of the 
areas of country adjoining all our great industrial centres. 
But, apart from the question whether this more adventurous 
section of the rural population is ‘better' in the full sense of 
more desirable than the stay-at-homes, the eugenic class- 
test demands economic opportunities for all town dwellers 
which have never been effectively supplied. What propor¬ 
tion of the country labourers drawn into London life during 
the past two centuries have succeeded in rising into the 
higher pecuniary grades, or conversely, what proportion of 
the London well-to-do have been recruited from these ele¬ 
ments? While no definite answers to these questions are 
forthcoming, we can find no ground for accepting the idea 
that the sifting of ‘successful’ characteristics among our 
population in city life has been so general and so severe as 
to deposit the population as a whole in pecuniary grades 
corresponding to the physical, mental, and moral virtues of 
their members. 

The utmost that can be concluded legitimately from such 
analysis is that certain innate qualities, physical and tem¬ 
peramental, to a less extent intellectual, may be expected 
to be found more highly developed in the richer strata of the 
population, certain definite defects in the lower. But as to 
desirability, from the standpoint of the community or human 


368 


AN OPTIMUM POPULATION 


services, our judgment is further impaired by the reflection 
that the conditions of selection in the economic struggle may 
be, and very likely are, such as to preclude from success some 
of the finest types of intelligence and morals, because these 
fine qualities are incompatible with other ruder and lower 
qualities that are essential in the coarser activities of the 
upward struggle. 

In examining the concept of the ‘economic optimum’ of 
density we saw grounds for concluding that distinctively 
economic considerations of maximum income were not valid 
indices of a size and distribution of population, either for a 
family, a nation, or the world, in conformity with a standard 
of the humanly desirable. Our consideration of the qualita¬ 
tive population question leads to a similar conclusion. The 
composition of the desirable population for any country, or 
for the world, cannot rightly be determined by exclusive 
consideration of the factors conducive to economic success 
either in the present economic struggle, or even in a reformed 
economic society. For the qualitative population question 
must regard man not exclusively, and in a well-regulated 
community not primarily, as a producer and consumer of 
economic goods, but as a human being fit for a civilisation 
in which the distinctively economic aptitudes are destined to 
fill a smaller proportion of a more spacious and more varied 
life. 


APPENDIX TO POPULATION 
A Point in Immigration Policy 

A point is often raised in immigration policy which has 
an important bearing both on the quantitative and the quali¬ 
tative aspects of world-population. It is thus stated by 
Professor East, in an address at the recent World Popula¬ 
tion Congress at Geneva: “If emigration takes place from 
a country in which there is population pressure to a so-called 


AN OPTIMUM POPULATION 


369 


under-populated country, there is an immediate increase in 
the birth-rate of the former country which restores the 
equilibrium.” This is, of course, only a reaffirmation of a 
position taken by many leading writers on the population 
question from quite early times. Mr. H. P. Fairchild quotes 
a statement of the position from a copy of the American 
Mercury in 1792 and cites a number of nineteenth century 
economists in support of the view. 1 It is sometimes argued 
that the almost automatic filling up of the areas temporarily 
thinned by the emigration of their inhabitants is compen¬ 
sated in the country to which they migrate by a reduced rate 
of growth of the population already established in that coun¬ 
try, in which case no alteration is effected in the total of 
world population, while a presumption may lie that the sub¬ 
stitution of newcomers unassimilated to the physical and 
cultural environment of the country they enter is detrimental 
to the population as a whole. Others argue that such immi¬ 
gration, far from releasing any pressure of population or 
subsistence, tends to aggravate the pressure, increasing the 
rate of growth of population in the new country without fur¬ 
nishing any lasting relief in the old. 

Mr. Fairchild himself draws an interesting distinction 
between the effect of a regular sustained emigration of mod¬ 
erate size and a sudden and extensive migration. “If the 
emigration is moderate, this chance is seized by the repro¬ 
ductive power rather than by the standard of living. The 
rate of increase of population rises until the drain of emi¬ 
gration is offset, while the standard of living remains un¬ 
altered, and the total population continues the same. The 
very fact of emigration gives a sense of hopefulness to the 
people, and the knowledge that there is an ever-ready outlet 
for redundant inhabitants causes the population of the coun¬ 
try to multiply more rapidly than it otherwise would”. “On 
the other hand — the opposite result may be achieved when 
1 Immigration, p. 416. 


370 


AN OPTIMUM POPULATION 


there is such a sudden and extensive removal of people from 
a country, that those who remain feel a definite and pro¬ 
found lightening of pressure. This must be sufficiently im¬ 
mediate and widespread to produce a sudden and significant 
rise in wages or fall in prices. In such a case it may occur 
that, before the forces of population have had time to fill 
the breach, the people may have become accustomed to a 
somewhat higher standard of living, which thereafter they 
may be able and inclined to maintain.” 1 

Upon this argument I venture two comments. Most mod¬ 
ern migration is inspired by definitely economic reasons. 
The prospect of an early considerable improvement of earn¬ 
ings and standard of living is required to evoke the enterprise. 
That ‘prospect’ may to some extent be ‘faked’ by interested 
emigration agents, but on the whole it is justified by ex¬ 
perience. Now if, as Mr. Fairchild holds, a sudden and 
significant rise of wages restrains the reproductive powers, 
that will operate more potently among the immigrants in a 
new country than among the temporarily thinned population 
of the country which they have quitted. For custom will 
weigh heavier among the latter. Though, therefore, the 
birth-rate of the new immigrants from Europe into America 
will be at first considerably higher than that of the older 
stocks of that country, it will, stimulated by the example of 
these older stocks and by the desire to maintain the higher 
standards general in the new country, come within a single 
generation to a sensible reduction of its birth-rate, espe¬ 
cially as a larger proportion of new immigrants pass into the 
position of city-workers. Thus, even assuming that the places 
vacated are speedily occupied by a rising growth of popula¬ 
tion, there need issue no general rise in the growth of world 
population, since a larger proportion of that aggregate is 
brought under the operative influence of birth-control. 

But my other comment takes the shape of questioning the 
1 Op. dt., p. 418. 


AN OPTIMUM POPULATION 


371 


validity of the assumption that the vacant places are quickly 
filled up by an increased reproduction in the population that 
remains behind. Concretely the suggestion implies that the 
young men and women left behind will be enabled and in¬ 
duced to marry earlier and so have larger families, with a 
higher survival rate for children, in consequence of the eco¬ 
nomic vacancies which the emigration has created. The 
death-rate for all ages of the population may also be reduced 
by reason of the easier circumstances in which they live. 
Now, though these tendencies must be operative in some 
degree, the available evidence does not warrant us in holding 
that they operate as quickly or as fully as is represented. If 
the direct effect of a moderate continuous emigration is to 
raise the wages, and otherwise to improve the economic situa¬ 
tion for those who stay at home, it is reasonable to suppose 
that part, at least, of that improvement will be retained in 
a higher standard of life, and will not be squandered entirely 
in earlier marriages and more prolific families. Moreover, 
the statistics adduced to support the theory of an automatic 
filling up usually ignore an important factor, viz., the tend¬ 
ency of populations of congested areas outside the actual 
area of emigration to find relief for their high population 
by flowing in to the areas reduced by emigration. 

I cannot, therefore, accept as valid the theory that a 
process of emigration by which the world population tends 
to be distributed more evenly over the various countries in 
proportion to their productive resources, necessarily leads 
to a larger aggregate population. The rising standard of 
living and of intelligence, which are first results of settle¬ 
ment in a new and sparsely peopled country, accompanied in 
most modern instances by a rapid initiation into the methods 
of limitation of families adopted by the older inhabitants of 
these countries, must be regarded as an adequate compensa¬ 
tion for any stimulation to the birth-rate and survival-rate 
in the countries from which the emigration has taken place. 


CHAPTER VII 


THE STATE AND INDUSTRY 

§ 1. Our enquiry into the processes of production and con¬ 
sumption which constitute the economic system, regarded 
from the standpoint of the humanly desirable, leads us in¬ 
evitably to the conclusion that the loose sort of fragmentary 
and low-conscious government of short-range and ill- 
adjusted self-interests that rules to-day is inadequate to 
safeguard and promote the economic and human welfare of 
mankind. While many of the business units in modern in¬ 
dustry, commerce, and finance, are well-equipped and well- 
organised for productivity and profit, many others are so 
ill-contrived and ill-administered as to waste a large part 
of their productive power to the detriment of capital, labour, 
and the consuming public. Even in the trades where the 
separate businesses are well-administered, the trades, as 
economic organs, are for the most part feebly organised for 
the furtherance of any of their common economic interests. 
Where there is efficient trade organisation of cooperation for 
regulation of production and of markets within a trade, the 
governing motive and effect is sometimes not a better and 
fuller utilisation of productive resources, but a restriction of 
output and a control of prices which inflict injuries upon other 
trades as well as on the ultimate consumer. From the purely 
economic standpoint of prices, wages, profits, huge wastes 
manifestly arise from lack of effectively planned cooperation 
between trades that are vitally dependent on one another 
for their efficient functioning. As one ascends from the con¬ 
sideration of the economic cell to that of the economic organ- 

372 


THE STATE AND INDUSTRY 


373 


ism, or system as a whole, conscious direction becomes feebler 
and looser. The power-house of finance, which comes near¬ 
est to a general instrument of economic government, can only 
effectively control the recent and more mobile forms of 
economic energy, its influence is confined to certain types 
of modern business enterprise, and the utility of its opera¬ 
tions is heavily impaired by corrupt manipulation and other 
anti-social modes of profiteering. 

The more one realises the intricacy and complexity of the 
economic system the more one is convinced of the need for 
a more conscious rational government, merely as a means to 
the better conservation and fuller exploitation of the eco¬ 
nomic resources of the world. But government for produc¬ 
tivity and government for human welfare, though related, 
are by no means identical concepts. Such economic govern¬ 
ment as exists to-day is not, as we see, even government for 
productivity, except so far as productivity conduces to profits, 
which is by no means always the case. But even were the 
economic system so closely correlated in its business and 
trade units as to conduce to the maximum productivity which 
technical knowledge and organisation rendered possible, such 
correlation and effective singleness of purpose would not 
yield the result which we here desiderate, a system whose 
productive and consumptive processes in their character and 
their distribution, make the largest direct and indirect con¬ 
tribution to human welfare. 

§ 2. Two things then are necessary. First, a more in¬ 
telligently ordered system of industry as a complex coopera¬ 
tive whole: secondly, an adjustment of this system to the 
demands of the humanly desirable, as embodied in accepted 
principles and policies of human welfare. 

In order to give concreteness to this general demand I may 
here briefly recite the prime essentials of a human economy 
as they have emerged from our enquiry. 

(1) The employment of human and natural resources in pro- 


374 


THE STATE AND INDUSTRY 


cesses of economic production so as to minimise the human damages 
in economic costs, and to maximise the human gains in economic 
products, bearing in mind the interactions between economic and 
other human interests and activities, as affected by economic 
processes. 

(2) Such government of industry, particularly in the business 
unit, as shall impress on all engaged therein a sense of fair play in 
the apportionment of work and the distribution of its product. 

(3) Conditions of work and of employment best calculated to 
evoke personal interest in the work and some sense of the social 
service that it renders. 

Among those concerned for human welfare, as expressed 
in the right relations between personality and community, 
these economic essentials will, I think, command general 
assent. As we have seen, liberal-minded and keen-sighted 
business men have been coming more and more to realise 
that business cannot any longer be run effectively by auto¬ 
cratic capitalism in the sole interest of profiteers or dividend 
receivers. The old hard legal conception of a business as 
‘belonging to’ those who furnish the capital has been insen¬ 
sibly undermined by the broader view, that it belongs also to 
the workers who utilise the plant and other capital by their 
labour, and to the customers who have become dependent 
on the product for their consumption. If in ordinary busi¬ 
ness the demands of labour for a larger share in the product 
and some voice in the control have tended to exclude the 
wider functional view, this has been due to the survival of 
the notion that competition among businesses will adequately 
safeguard the interests of the consumer. But when, as we 
perceive to be the case, competition is displaced or qualified 
by combination in many vital industries, the increased in¬ 
terests of consumers demand protection against restricted 
output and raised prices. So far as these curbs upon com¬ 
petitive autocracy have been imposed by labour or by the 
State, they have not secured that full moral acceptance 
essential to their best operation. But the machinery for the 
pacific settlement of issues between capital and labour, 


THE STATE AND INDUSTRY 


375 


covering wider areas of industry, and the legal regulations 
over conditions of production and employment, extending in 
recent cases to wages and prices, have been an important 
education of the public mind towards the functional view 
of industry. While most of the movements and policies con¬ 
tributing to this change have been opportunist and directed 
to the safeguarding of special interests or the redress of 
special grievances, there has been emerging from them a 
new, though as yet feeble, conception of the need for larger 
and more consistent policies embodying the conception of 
businesses and industries as social functions. This signifies, 
we recognise, a new attitude towards the control of business 
and the disposal of its product. We have already given some 
attention to this new attitude in its bearing upon the incen¬ 
tives of the human factors of production and the movements 
towards an economic reconstruction in which these incentives 
shall find full satisfaction. But in any attempt to envisage 
modern industry as a social function, some wider general 
survey of the problem of industrial government is needed. 

The new thought and feeling have most naturally found 
their chief expression in the separate local and trade cells of 
the economic organism, forming new contacts and avenues of 
corporate or cooperative action. But if we are to win a wider 
interpretation of the movement as an effort to secure a gen¬ 
eral control over the economic system in the supreme interest 
of human welfare, we must confront the need for expressing 
this supreme interest in some form of authority, some effec¬ 
tive system of government. Here I would pause in order to 
disclaim the intention of endeavouring in a brief chapter to 
do any more than merely indicate the broad condition of 
structure and function to which such a government must 
conform. 

§ 3. It will be best to begin by considering how far the 
political organisation termed the State is, or can become, the 
effective instrument of such government. For the purpose 


376 


THE STATE AND INDUSTRY 


of this argument the term State may be taken to include all 
machinery of political control from the ward or muncipality 
to the League of Nations or such other international organs 
as may be endowed with political authority. To many it 
will seem obvious that a general control of the economic 
system in the interests of the community can only be exer¬ 
cised by the State. For in the first place, they will ask, what 
is the possible alternative? In the Middle Ages in Europe 
the Church claimed to fulfil, and in some measure did fulfil, 
the function of a moral government of industry. But no 
remnant of such government survives, nor is such a restora¬ 
tion possible. Either the required government must be 
vested in the economic system itself by infusing into it a 
liberal human spirit and purpose, which it does not yet 
possess in any adequate measure, and endowing it with the 
requisite authority and power, or else the State, the only 
existing organ whose competence and power for conserving 
and advancing the interests of the community are formally 
unlimited, must be entrusted with this function of economic 
government. 

Both methods have their proponents and both can appeal 
to certain forces and tendencies of the age in their support. 
The idea of an autonomous economic system, conducting 
business operations with efficiency and due regard to the 
welfare of all parties concerned, and distributing the product 
fairly, is not a novel one. It has inspired not a few Utopians, 
and during the last century took a democratic shape in the 
aspirations of Robert Owen and his followers towards a co¬ 
operative commonwealth, an aristocratic shape in the eco¬ 
nomic chivalry expounded with so much eloquence and pas¬ 
sion by John Ruskin. Distrust of politicians and bureau¬ 
crats on the one hand, the cult of voluntary social service by 
rotary clubs and economic liberalism among the business and 
professional classes on the other hand, have conspired to give 
a fresh impetus to proposals for an economic government 


THE STATE AND INDUSTRY 


377 


working for public service, but substantially independent of 
the State, and even taking over many of the economic func¬ 
tions at present exercised by civilised States. 

The argument runs as follows. The existing State, dynas¬ 
tic or democratic, is discredited and obsolescent, its national¬ 
istic activities are essentially separatist and destructive: 
hampered by outward traditions, it is inadaptable to the 
quick requirements of our changing times: when it lays its 
clumsy hands upon our business processes, it paralyses 
progress: its feigned expertism is an academic sham. The 
scientists, financiers, and large-minded statesmen who know 
what is wanted, what can be done and how to do it, should 
take control, establishing a working government of the busi¬ 
ness world that should be virtually independent of the politi¬ 
cal state, presumably winning the consent of the latter and 
constructing some stable modus vivendi between a growing 
economic and a shrinking political government. The at¬ 
tempts of the modern State to cope with the social transfor¬ 
mations brought about by modern business have pitilessly 
exposed its incompetence, and, like other incompetent in¬ 
stitutions, it must yield place to a new and better-ordered 
power. Such is the interesting thesis expounded with ample 
historic circumstances by Mr. William Kay Wallace. 1 Mr. 
H. G. Wells has given his own characteristic treatment of 
the same theme. The new control that is to emanate from 
the ‘Open Conspiracy’ by which groups of trained alert and 
constructive men and women will set themselves, by persua¬ 
sion, permeation, and where necessary organised force, to 
establish peace, regulate population, dissolve the national 
State, organise and distribute equitably the material re¬ 
sources of the world, though not exclusively economic in its 
activities, will mainly be occupied with economic government. 
For most of the functions of the “responsible world directo- 

1 The Passing of Politics and Thirty Years of Modern History. 
The Macmillan Co. 


378 


THE STATE AND INDUSTRY 


rate”, ultimately established, will depend for their efficient 
performance upon the successful administration of the eco¬ 
nomic system. 

“The amalgamations and combinations, the substitution of 
large-scale business for multitudes of small-scale businesses, 
which are going on now, go on with all the cruelty and dis¬ 
regard of a natural process. If man is to profit and survive, 
these unconscious blunderings — which now stagger towards 
but which may never attain world organisation — must be 
watched, controlled, mastered, and directed. As uncertainty 
diminishes, the quality of adventure and the amount of waste 
diminish also, and large speculative profits are no longer 
possible or justifiable. The transition from speculative ad¬ 
venture to organised foresight in the common interest, in the 
whole world of economic life, is the substantial task of the 
Open Conspiracy.” 1 

What appears to be common ground between ‘The Open 
Conspiracy’ and Mr. Wallace’s realistic interpretation of the 
actual displacement of politics by the controls of big busi¬ 
ness is the self-assertion of conscious expert minorities, and 
the scrapping of national barriers. 

“Under the institutions of the future,” writes Mr. Wallace, 
“the individual will not be called upon to express, through his 
vote, his views on problems of administration or policy, as 
to-day he is not called upon to express his views regarding 
technical problems in industry. These will be left to the 
expert in the one case as in the other. In the new institutions 
the private interests of the individual will coincide with his 
public function. This function is to contribute to the pro¬ 
ductive efficiency of the community, which in turn will afford 
him an immediate reward for his labours. This does not 
mean the nationalisation of industry, or State control in any 
accepted sense of the term. In fact the Nation State will 
be displaced from its position of primacy in the social order 
1 The Open Conspiracy, p. 122. 


THE STATE AND INDUSTRY 


379 


and become an administrative mechanism for the main¬ 
tenance of public security.’’ 1 

How far the recent Communist experiment in Russia is 
to be regarded as a case of the supersession of political by 
economic government we need not discuss at any length. 
That it has been the active work of a ‘conscious minority’, 
assuming the right to act for the inert mass of the ‘proletariat’, 
and that it has been mainly devoted to tasks of economic 
organisation, is indisputable. But the conscious minority 
who seized control, though inspired by theories and projects 
mainly economic, were essentially political revolutionists, 
not economic experts, and their rule has been a slow groping 
after the requisite economic efficiency to enable them to 
maintain their political control. The Communist party 
wields full powers of the political state. It has not sought 
to displace this State by a distinctly economic or¬ 
ganisation. 

§ 4. The projects for independent economic governments 
under the titles of Syndicalism, Guild Socialism, or Coopera¬ 
tion, need not detain us long. They are all extensions of the 
idea of democratic government from the sphere of politics 
into that of economics. Not experts or conscious minorities 
are to rule, but the common sense and identity of wants and 
interests among the masses of organised workers, or con¬ 
sumers. Somehow, the present capitalist control of busi¬ 
ness is to be removed, either by sabotage or other violence, 
or by legalised confiscation or taxation, or by the gradual 
acquisition of necessary capital by workers’ savings or bor¬ 
rowings. Then the workers, either in their several businesses 
or trades, or as consumer-shareholders, will be in control of 
the actual administration of the economic processes, running 
them, it is supposed, so as to secure the welfare of the work¬ 
ing-class community. So long as these schemes are regarded 
in the vague, or realised only in particular group experi- 
1 Thirty Years of Modern History, p. 276. 


380 


THE STATE AND INDUSTRY 


ments, their difficulties and internal contradictions are not 
realised. The fundamental fact, that the identity of in¬ 
terests among The workers’ breaks up on inspection into a 
great variety of conflicting group interests, only appears 
when Syndicalism or Guild Socialism is seen in its completed 
form. Why should the interests of the members of a Build¬ 
ing Guild, in the pay they receive, through the prices they 
charge, coincide with the interests of the other workers who 
buy or rent their houses? So with the relations between 
all other groups of syndicated workers. Attempts are made 
to introduce standards of values for correlating the economic 
interests and measuring the social values of the contribu¬ 
tions from the different groups. It is suggested that these 
very needs will evoke what will soon become an authorita¬ 
tive representative government, a complete industrial 
democracy. But a functional representation of the several 
economic interests, even though balanced by representa¬ 
tion of the generalised consumer, could not constitute a com¬ 
plete economic government. For in such a body there would 
be no sufficient homogeneity of mind: its deliberations and 
its policy would be informed by no common interest and 
purpose. The interests of the organised workers in their 
several vocations would conflict with the interests of the same 
persons as consumers, and whenever one vocation or industry 
depends upon another for some commodity or service, similar 
difficulties would arise. While, therefore, a representative 
parliament of industry would be an exceedingly serviceable 
instrument for discussion of vocational claims and policies 
in the light of the broader economic interests of the com¬ 
munity, and might evolve a pacific machinery for the ad¬ 
justment of many conflicts, it could not dispense with the 
final authority of the political State. 

“If it is the vocational will,” say Mr. and Mrs. Webb, 
“not the civil will, that ought to be represented when voca¬ 
tional issues are involved, it is equally the will of the citizens 


THE STATE AND INDUSTRY 


381 


as such, not that of carpenters or engineers as such, that needs 
to be represented when the questions at stake touch their 
feelings and emotions as citizens, and not as carpenters or 
engineers.” 

I would not, however, go so far as Mr. and Mrs. Webb in 
regarding vocational representation as “a positive impedi 1 - 
ment to any ascertainment or presentation of the General 
Will of the community and to any ensuring of its execution,” 1 
provided that the vocation of the consumer is duly repre¬ 
sented, and that a final voice in all important issues is re¬ 
served for The civil will’. 2 

§ 5. But however efficient and complete a scheme of eco¬ 
nomic self-government on oligarchic or democratic lines 
might be devised, it could not be operated independently of 
the political State, or without submission to the ultimate 
authority of the State, as representing the guardian of the 
general welfare. For the ethical conception of the modern 

1 A Constitution for the Socialist Commonwealth of Great Britain, 

p. 314. 

2 The notion, however, that the interests of consumers alone ulti¬ 
mately count and that under consumers’ control the community is 
necessarily, safer, will not bear investigation, though, curiously 
enough, it is a conclusion reached by Mr. G. B. Shaw after four hun¬ 
dred, and five pages of argument. Socialism, as he sees it, “insists 
that industries shall be owned by the whole community, and regulated 
in the interests of the consumer (or customer) who must be able to 
buy at cost price without paying a profit to anybody. A shop, for in¬ 
stance, must not belong to the shop assistants, nor be exploited by 
them for their profit: it must be run for the benefit of the customers, 
the shop-assistant’s safeguard against finding herself sacrificed to the 
customer being that she is herself a customer at the other shops, and 
the customer herself a worker in other establishments.” The Intelli¬ 
gent Woman’s Guide to Socialism and Capitalism, p. 446. 

Unless the worker’s interests or 'human costs’ are directly repre¬ 
sented and assessed in terms of welfare, the safeguard named by Mr. 
Shaw will afford no adequate protection to the workers in any par¬ 
ticular shop or other business. The consumer in a particular shop will 
tend to sweat the employees, undeterred by the, to her irrelevant, 
consideration that she is “herself an employee in another sort of 
business”. 


382 


THE STATE AND INDUSTRY 


State does not confine its functions to some narrow concep¬ 
tion of the protection of life and property, but regards it as 
the collective instrument for promoting in every way the 
fuller, richer life of its individual members and their common 
economic and cultural heritage. 

It, therefore, claims a general suzerainty over the economic 
system, upon the ground which we have already explored, 
that all economic processes are organically interwoven with 
other human processes and affect human welfare in count¬ 
less ways that lie outside the economic purview. 

On the other hand, definitely political activities are found 
to affect economic processes, sometimes by direct and pur¬ 
posive interference, sometimes by the indirect assistance or 
obstacles they present. The case for regarding the State as 
a distinctive factor in the production of wealth, and as a 
rightful claimant to its share of the product in the shape of 
public revenue, is irrefutable. The notion of the State as 
a parasite upon the economic system, ‘confiscating’ by 
process of taxation property entirely created by individual 
skill and labour, has already been exposed for the noxious 
fallacy it is. But the position we claim for the State as the 
chief general organ for collective human welfare requires a 
clearer statement of the relations of the State to economic 
life. 

The State can contribute to the security and improvement 
of human life by various definite economic policies. 

The first line of policy is strictly protective. By restric¬ 
tive regulations upon terms of labour contract, and other 
physical or moral conditions of employment, the State pro¬ 
tects weak, ignorant, or careless workers, against risks 
incurred in productive processes. By compelling insurance, 
it safeguards workers against actual damages to person or 
to livelihood due to industrial causes. 

Other protective or preventive interferences with industry 
are directed to protect the consumer against poisonous or 


THE STATE AND INDUSTRY 


383 


other bad qualities in goods, false measures, and other mis¬ 
representations, or the general public against pollution of 
the common air or water, or other public nuisances that may 
arise from industrial operations. 

Finally, State aid is needed to protect the investing public 
against fraudulent or negligent abuses of the public com¬ 
panies’ acts, by securing full, reliable, and intelligible infor¬ 
mation in prospectuses and balance sheets, and in safeguard¬ 
ing the shareholders against reckless or dishonest financial 
manipulation by directors over whom they have no adequate 
control . 1 

A second line of policy is directed towards a more equal 
and equitable apportionment of the product of industry. 
Though modern States are slow to assume this economic 
function formally, they are moving piecemeal towards a 
recognition of the need to enforce minimum conditions of 
livelihood through public regulation of wages and prices. 
After guaranteeing real wage rates in public employment, 
they are proceeding to enforce minimum wage rates on semi¬ 
public and other organised industries. Pensions and insur¬ 
ance policies work in the same direction. The imposition 
of legal limitations of profits upon national or municipal 
monopolies or other quasi-public business concerns, and the 
price-fixing rules attached to charters of incorporation, are 
movements in the same direction. Though the graduations 
and discriminations in modern taxing systems are guided 
primarily by facilities in raising revenue, their incidental 
effect in promoting a more equal distribution of the general 
income is not inconsiderable. 

A third line of State policy lies in what is called develop¬ 
ment. Under that may be included not only undertakings 

1 1 do not, however, endorse Professor Laski’s proposal to give 
shareholders equal voting power at the general meeting of a com¬ 
pany, irrespective of the number of shares they own. It would 
probably lead to creation of dummy shareholders by the directors 
or any strongly interested group of shareholders. 


384 


THE STATE AND INDUSTRY 


for the discovery, preservation, improvement of the eco¬ 
nomic raw resources of a country, such as road-making, 
drainage, afforestation, harbours, etc., but the whole of the 
work of public health, education, and scientific research, so 
far as it is contributive towards economic productivity. 
Here is a directly creative attitude of the State towards the 
economic system, though such of the work as is directed to 
health, education, and other personal factors may not be 
primarily economic in its purpose. 

Closely related to this economic policy is the general 
policy of constructive public expenditure by which the State 
diverts what we have here defined as the economic surplus 
from private hands, in order to utilise it for raising the 
standard of communal life. Here we are concerned, not 
with specifically economic development, but with works of 
immediate cultural and human welfare carried out by public 
bodies using public funds. 

These four related policies testify to an increasingly con¬ 
scious realisation by the modern statesman that a chief func¬ 
tion of the modern State is to effectuate the principle of the 
social determination of economic values, by making itself 
the final arbiter in discriminating between the private in¬ 
comes needed to evoke and stimulate the productive activities 
of mind and body in the various classes of workers, and the 
surplus wealth which, emerging in excess of these require¬ 
ments, forms a social fund to be administered either directly 
by the State, as formal representatives of society, or by such 
other competent social institutions as the State may authorise 
and endow for this purpose. 

§ 6. But we are still confronted with the difficulties raised 
by realistic criticism of the competence of the State for the 
performance of these growing complex functions. Consider¬ 
ing the State as the ultimate executive authority in imposing 
good human conditions upon the operation of the economic 
system, the most critical of all our ethical problems will be 


THE STATE AND INDUSTRY 


385 


how to secure a State that shall be wise and good enough for 
such a task. In the operation of the four general policies 
above cited there are several distinguishable attitudes which 
the State might adopt. 

The first is public ownership and administration, i.e., state 
or municipal socialism, in the simpler sense of that term. 
Three considerations determine what industrial or other 
services fall into this category: first, the degree of ‘monopoly : ’ 
attaching to the industry, secondly, the general importance 
of the services it renders to the consuming public, thirdly, the 
measure of regularity and routine attaching to its processes 
and its administration. 

Where these three conditions co-exist, as in roads and 
ordinary transport services, including the carriage of letters 
and parcels, telegraphic, telephonic, and wireless communi¬ 
cations, generation and distribution of power in bulk, and 
many of the ordinary municipal services, the trend towards 
public ownership and administration is dominant. 

Where the degree and character of the monopoly compel 
public ownership, it is often recognised that the delicate and 
expert management of an industry which, though the goods 
or services it supplies are common utilities, is in itself a 
mobile and progressive institution, is better entrusted to 
private business administration under public control as to 
prices, profits, and conditions of labour. So we can have a 
half-way house to socialism in the shape of public ownership 
with private administration. The important industries of 
railroads, banking, coal mining, and electric supply in 
Britain, America, and other advanced industrial nations, are 
held to lie along this line of country. Affected with strong 
public interest by reason of their limitations of supply and 
the common need for their product, they are recognised as 
‘public concerns’ whose administration must be under some 
stringency of public control. 

Whether the economies of skilled administration plus 


386 


THE STATE AND INDUSTRY 


efficiency of public control can better be obtained from a 
publicly appointed business body, such as the Metropolitan 
Water Board in London and the Thames Conservancy Board, 
removed from all directly political influence, or from a 
private capitalist company, such as the Metropolitan Gas 
Company, is not perhaps an issue of the first importance. 
For the question whether the capital of the business is pub¬ 
licly owned, or privately owned with restricted profits, is of 
minor significance as compared with the question of the 
reality and efficiency of the public control. Adequate dis¬ 
cussion of this vital issue of control is here impossible, for 
it would involve us in a thicket of economic technicalities. 
But the general moral conditions of the problem of control 
urgently need to be faced. For there is a danger lest it should 
be utilised by defenders of private profiteering enterprise, in 
order to evade effective public interference. The assumption 
that the State may be able effectively to safeguard all genu¬ 
inely public interests, in a trade of which it could not success¬ 
fully take over the administration, cannot lightly be 
conceded. Experience of legislative controls by the Inter¬ 
state Commerce Board, the Sherman Act, and other attempts 
to control big monopolistic enterprises in America, where the 
issue has been most severely tested, does not warrant us in 
holding that public control is likely to be a better safeguard 
of the public interests than public administration, in indus¬ 
tries of vital importance to the community. Big business 
in such instances generally exhibits a disconcerting power 
to control the public control . 1 

It is generally conceded that, though the State must enlarge 
the area of its public economic enterprise, and the extent and 
rigor of its ‘controls’ over the big organised industries which 

1 Alike in its preference for Boards independent of direct political 
interference, and for public controls in general, instead of public 
administration, the Liberal Industrial Enquiry, desirous to escape the 
taint of socialism, gravely underestimates the difficulties of an effective 
public control. 


THE STATE AND INDUSTRY 


387 


supply the prime needs of the consuming public, most of the 
less organised industries, many organised luxury trades, and 
all new trades in the growing and experimental stages, form 
a sphere of uncontrolled, though not wholly unrestricted, 
private business enterprise. State intervention in such 
trades will be confined to securing safety and hygiene in 
the workshop, decent conditions for the employees, pro¬ 
tection for the consumer and the investor, and the due exer¬ 
cise of the taxing power to secure for the public a share in any 
surplus profits of such private enterprises. 

§ 7. How much wisdom, good will, and efficiency can be got 
into the State for the successful performance of these mani¬ 
fold duties? It is useless to urge that a State is inherently 
incapable of performing such duties, and that any attempt 
to put them on it is to court economic and moral disaster. 
This is a counsel of moral cowardice and despair. Our 
analysis of the waste, injustice, and inhumanity of the pres¬ 
ent economic system imposes a responsibility of collective 
conduct in which the State must take a prominent part. 
The things the State is doing which it must do better, the 
things it must do which it is not yet doing, are quite definite 
obligations, and to shirk them is a policy of anarchy. How 
to get the required intellectual and moral energy into the 
elected and official persons who comprise the State as a 
human agency is, therefore, the problem that directly presses 
for solution. For the main charges against the competence 
of the State are that, as an administrative instrument for 
economic government, it is inert, mechanical, aloof, as an 
instrument of policy that it is normally partizan and some¬ 
times corrupt. 

This aloofness of officials and partizanship of politicians 
are symptoms of the same political disease, a failure of the 
general will to function freely, strongly, and intelligently. 
That failure may be imputed, partly, to the lack of suitable 
channels through which the 'common sense’ of the people 


388 


THE STATE AND INDUSTRY 


and the expert knowledge and judgment vested in groups of 
business men and citizens can function, so as to affect and 
influence the economic policy of the State; partly, to a moral 
and intellectual indifference among all classes of ordinary 
citizens, due mainly to a sense of the aloofness of the State, 
which checks and paralyses any impulse towards active par¬ 
ticipation in movements for democratic control. To some 
extent the trouble is due to the fact that a political State, 
not primarily designed for important and delicate acts of eco¬ 
nomic government, has been drawn too rapidly into work for 
which it is ill-fitted. Rut this defect only means that the 
State needs to be strengthened on its economic side, so that 
its aloofness is broken down and it is kept in vital contact 
with the needs and demands of a continually changing eco¬ 
nomic situation. In actual industry to-day combination is 
everywhere displacing free competition, for, when compe¬ 
tition survives, it is in most instances organised and limited. 
Everywhere in the business and trade-units elements of 
representative government are asserting themselves, and 
cooperative organs for settlement of differences and for the 
furtherance of common interests are coming into being. 
A network of special and general trade congresses and con¬ 
ferences, local, national, international, brings into regular 
contact the active representative minds of the various depart¬ 
ments of the economic world, employers, managers, tech¬ 
nicians, workers, financiers. 1 These trade associations, 
supplemented by groups of independent economic students, 
produce great stores of economic information needed for the 
purposes of economic government. It is evident that some 
more formal relations should be set up between these associa¬ 
tions and the State. The latter evidently might extend 

1 The endorsement by the Trades Union Congress in Great Britain 
(1928) of the negotiations between powerful groups of Employers 
and Trade Unionists in the principal industries for the formation of 
a consultative National Industrial Council, is a notable advance in 
a constructive policy. 


THE STATE AND INDUSTRY 


389 


itself by the regular utilisation of such associations for ad¬ 
visory and even for administrative purposes, delegating to 
them the requisite statutory powers. The beginnings of such 
a process are, of course, already discernible in our Trade 
Board Acts and in other recent instances. Every wise ex¬ 
tension of this policy signifies a larger participation of in¬ 
formed public opinion in the State and pro tanto mitigates 
the stiffness and aloofness of government. The growth of 
such facilities for influencing and participating in the State 
not merely renders the State technically more competent for 
economic government, but nourishes in the intellectually and 
morally alert portions of the public a sense of real member¬ 
ship in the State that spreads new confidence in its wisdom 
and integrity. This increased participation of alert minds 
among the different classes of the community in the actual 
decisions and operations of the State is the first essential for 
the efficient performance of the new tasks of economic gov¬ 
ernment to which every modern State is committed. 


CHAPTER VIII 


ETHICS OF ECONOMIC INTERNATIONALISM 

§ 1. Porro Unum necessarium est. However well-in¬ 
formed and reformed the national State might be, it could 
not fulfil efficiently the task of the economic government of 
its people, for the simple reason that the economic system 
is not a national system in its area and structure. The chief 
desiderata of economic welfare, productivity, and economic 
justice, are impracticable without international government. 
Mr. Wells would say world-government, positing the unity 
of a world-state. But holding that large sections of govern¬ 
mental work in industry must continue to be exercised within 
national limits, I should content myself with an insistence 
that the international government which is slowly struggling 
into being shall be invested with sufficient federal power to 
over-ride the selfish policies of surviving national interests 
and animosities operative in the economic field. For none 
of the graver problems of human welfare which we have en¬ 
countered is capable of sound solution upon a purely national 
scale. Peace, security, disarmament, arbitration, the prime 
objects to which the machinery of our new internationalism 
at Geneva and elsewhere is directed, are quite unattainable 
unless accompanied by a virtual abandonment of exclusive 
national economic policies. The Powers at Geneva, or out¬ 
side, in their fumbling after a world-peace policy are as yet 
unwilling to face this crucial issue. This statement can be 
tested easily. Every nation, when invited to outlaw war, 
reserves the case of wars in self-defence. But when self- 
defence is narrowed down to cover only the resistance to in- 


390 


ECONOMIC INTERNATIONALISM 


391 


vasions of their national territory, it is soon discovered that 
this reservation is not enough. Self-defense must cover the 
defence of other vital interests, some of which lie outside our 
territorial boundaries. Now most of these vital interests, 
when boiled down and separated from their political skins, 
are the economic interests possessed by our nation, or the 
financial and commercial groups who operate our national 
policy, in having favourable access to the markets and the 
material resources of other countries. 

So far as the civilised nations are concerned, these interests 
are real and genuinely vital in the sense that civilised life 
is dependent upon adequate and reliable access to these 
external markets and resources. Civilised life cannot go on 
without a number of raw materials, some or many of which 
lie outside the confines of our national territory. “Without 
coal, oil, iron, cotton, silk, nitrates, indigo, potash, plant 
derivatives, and the innumerable other materials that enter 
into its intricate processes, modern industry could not exist.” 1 
In Western countries populations have come into being and 
standards of living have been established on the basis of 
access to these outside supplies. Now these raw materials, 
which ‘our’ people vitally need, will usually lie in countries 
of low development and low civilisation. For so far as they 
are contained in countries upon our level of development, 
they will normally be required to furnish the personal or 
industrial requirements of the peoples of these countries, who 
will prefer to sell finished products to us instead of the ma¬ 
terials which we may wish to buy. The great problem of 
economic internationalism is, therefore, that of the relations 
between the industrialised and the non-industrialised coun¬ 
tries. It is a common interest of all industrialised nations 
that certain important resources of ‘backward’ countries shall 
be developed and made accessible to them upon reasonable 

1 The White Man’s Dilemma, by Nathaniel Pfeffer, p. 84. Mr. 
Pfeffer presents in this book the most convincing analysis of the is¬ 
sues raised by modern imperialism to be found anywhere. 


392 


ECONOMIC INTERNATIONALISM 


terms. Have the peoples of these backward countries any 
‘natural’, ‘reasonable’, or ‘moral’ right to withhold these 
resources, and to refuse, either to develop them themselves, 
or to allow others to supply the capital and labour which they 
cannot or will not supply? Two answers are possible. One 
is that of the absolute nationalist, who insists upon the unre¬ 
stricted property of the occupants of a country in its natural 
resources, including the right of use or non-use, according 
to their own will. The other is that the needs and interests 
of humanity at large, the people of the world, must over-ride 
the purely national will, where the latter is obstructive to the 
former. Justice and reason, however, make the proviso that 
when the obstructive national will is over-ruled, it shall be 
by an outside power which can reasonably be taken as repre¬ 
sentative of the interests of humanity, not of the interests 
of some section of a particular outside nation. Modern im¬ 
perialism has been a consistent defiance of this sound proviso. 
The particular national policies of developed Western coun¬ 
tries, shaped by financial and commercial groups, have been 
directed to force trade relations and development of natural 
resources upon backward countries, and to establish political 
controls over them which shall attach these sources of wealth 
to their own national economic system. The allied purposes 
of securing on exclusive or preferential terms access to the 
raw materials of backward countries, markets for the manu¬ 
factured exports of the developed country, and lucrative 
fields for the investment of the surplus capital of the ad¬ 
vanced country in developing the backward country, consti¬ 
tute quite manifestly the tap-root of modern imperialism. 
The struggles between advanced nations for these economic 
advantages have been the chief underlying causes of almost 
all modern wars, including the Great War. No real or per¬ 
manent world-peace is possible until the economic relations 
between advanced and backward countries are put upon an 
equitable footing. For, so long as each advanced nation 


ECONOMIC INTERNATIONALISM 393 


regards the exploitation of the raw resources and the markets 
of some backward countries as a special Vital interest’ of 
its own, and uses its economic, diplomatic, and fighting forces 
to ‘defend’ that ‘vital interest’, there can be no security either 
for the peace or the economic prosperity of the world. Peace 
is impossible, because two ‘legitimate’ sources of war remain 
open. Wars arise between two or more advanced Powers 
whose separate economic policies are directed to the exploita¬ 
tion of the same backward country, a conflict which intensi¬ 
fies as the number of these unappropriated areas diminishes. 
Wars, commonly euphemised as ‘police measures’, ‘punitive 
expeditions’, or ‘frontier incidents’, will continue to take place 
for the enforcement of these economic interests of an impe¬ 
rialist power over peoples which it has taken or is taking 
under its political aegis, as colonial possessions, protectorates, 
‘spheres of interest’, or ‘spheres of legitimate aspiration’. 

§ 2. Until some government has been evolved which is 
genuinely super-national, in the sense that it has authority 
to decide, and power to enforce its decisions, in issues affect¬ 
ing the utilisation of such world resources as it may deem to 
lie outside the reasonable limits of the several state authori¬ 
ties, there will be no abolition of war and no sound economy 
of world resources. The Mandates issued by the League 
of Nations for the government of certain ex-enemy posses¬ 
sions in the Peace Treaty, are a first dim formal expression 
of this need. The underlying principles of the Mandates are 
these, that the interests of the population of the mandated 
area are to be a first consideration, that the interests of other 
nations (at present confined to members of the League) are 
to be upon an equal or equitable basis, and that the rule of 
the mandatory power be subject to the supervision of a body 
representing the international authority. Imperfectly as 
these principles are realised in the present working of the 
mandatory system, they contain the germ of an international 
economic government which cannot in the long run be con- 


394 


ECONOMIC INTERNATIONALISM 


fined to the exploitation of the resources of a few definitely 
backward countries, the political control of which happens 
to have changed hands in the fortunes of war. Already the 
anomalous and awkward situations produced in Africa, 
where mandated areas adjoin the colony or protectorate of 
some European power, are beginning to evoke a demand for 
extension of the mandatory policy to all such territories, 
partly in order better to safeguard the legitimate interests 
of the natives, but chiefly in order, by equalising economic 
opportunities for the Western industrial nations, to draw 
the fangs of competitive imperialism. 1 

§ 3. But serviceable as this mandatory principle is, and 
may become, in superimposing an international control upon 
the national controls in the relations between advanced and 
backward peoples, it will need much amplification before it 
can become an effective instrument for the constructive task 
of full economic internationalism. The world is not divided 
into highly industrialised white countries, on the one hand, 
and definitely backward countries with primitive populations 
on the other. There are great territories, mainly occupied 
and ruled by white men, that are thinly peopled and largely 
undeveloped, such as Australia and large tracts of South 
America. There are other large countries in Asia, inheri¬ 
tors of ancient civilisations, claiming full control of their 
political and economic government, upon which it would be 
hardly possible, even if desirable, to impose a white man’s 
mandatory system. Now in the effective economic develop¬ 
ment of both these types of country, the world at large, hu¬ 
manity, is vitally interested. If China contains great unused 
resources of coal and minerals, which are world-needs, her 
national government has no moral right to withhold their 
development. If her people can and will develop them, with 
their own skill, labour, and capital, any reasonable interna- 

1 See H. N. Brailsford’s Olives of Endless Age for a powerful pre¬ 
sentation of this and other proposals of constructive internationalism. 


ECONOMIC INTERNATIONALISM 


395 


tionalism leaves the task to them. But if they cannot, or 
will not, do the work themselves, they must allow outsiders 
to come in and do it. In a word, absolute property with its 
jus utendi et abutendi can no more be admitted in a case of 
the collective occupants of a country, called a nation, than in 
the case of individuals. The same principle must hold of 
a white population in political control of a country which by 
reason of their small numbers, or for climatic, or other rea¬ 
sons, they are unable to occupy and develop. Australia is 
the most conspicuous example. With a low birth-rate and 
a white population concentrating in cities, white immigra¬ 
tion sharply restricted by distance and legal obstructions, 
vast areas of potential wealth in foods and minerals remain 
barren because of the refusal to give access to the teeming 
Asiatic populations able and willing to develop them. What 
right have the scant populations of this large continent to 
deny to mankind this source of work and wealth? 

I am well aware that thus stated the issue is over-simpli¬ 
fied. Alike in the case of China and of Australia, the nation¬ 
alist position is defended on the ground that political, racial, 
and other considerations, may rightly outweigh the admitted 
economic interests of the outside world. And so they may. 
When a new country is politically fin the making’, restric¬ 
tions upon the free admission of outsiders, who are racially or 
otherwise difficult of assimilation, are justified, for there is 
a reasonable presumption that the actual inhabitants of a 
country should decide what numbers and sorts of outsiders 
should be admitted. So likewise in an old country there is 
a reasonable presumption in favour of leaving its people 
and government to develop its resources in their own way, 
and at their own pace, rather than of forcing the admission 
of foreigners and foreign methods which may disintegrate 
the traditional life of the country and cause dangerous 
disorders. 

But these presumptions in favour of the economic self- 


396 


ECONOMIC INTERNATIONALISM 


determination of each country have no more absolute validity 
in the case of strong and advanced countries than in weak 
and backward ones. Nationalism has no equitable claim to 
block the development of the resources of any section of 
the world merely because her political government extends 
over this section. The presumption in favour of her eco¬ 
nomic judgment may and ought to be capable of being over¬ 
ridden and set aside by a government competent to interpret 
fairly the interests of humanity at large. 

Here, of course, we come to close grips with the moral 
spirit of a nationalism which is simply collective selfishness 
on its largest and most injurious scale. To tell Australians, 
Chinese, Americans, Britons, that they have no equitable 
right, finally and absolutely, to determine what persons or 
what goods shall enter or leave their shores is to challenge 
their most sacred sentiment of patriotism. Yet, until this 
spirit of exclusive nationalism, with its refusal to acknowl¬ 
edge the larger and higher rights of humanity, is exorcised, it 
will not be possible to go far towards the effective abolition 
of war and the constructive work of a genuinely world 
economy. 1 For peace and a world economy require a far 
larger, more complex, and more reliable system of economic 
internationalism than is at present contemplated at Geneva. 

§ 4. The essential obstructiveness of political barriers to 
the free flow of economic life has often been exposed by 
economists, who find in complete liberty of trade, travel, and 
investment, a natural harmony of interests which would 
secure the best development of the productive resources of 
the world and their best distribution among the inhabitants. 
Unfortunately this natural harmony has no more validity 
on the world scale than for smaller economic communities. 
National selfishness cannot be exorcised by its logic. A 
rigorous immigration policy, restrictions upon the entrance 

1 This is more manifest by certain reservations in the recent Kel¬ 
logg Pact. 


ECONOMIC INTERNATIONALISM 


397 


or export of capital, monopoly of colonial trade, an exclusive 
tariff, may, in a short or even a long run, be economically ad¬ 
vantageous to the groups who can control the government of 
their country, or even to its existing population as a whole. 
For a policy which is to the present or ultimate advantage 
of the world may damage economically some particular 
area, reducing its commerce, diminishing its population, and 
otherwise impairing its importance. So long as the nation 
continues to be the effective limit of loyalty, there is no 
adequate foundation for the world economy. If most 
Britons, Americans, Frenchmen, prefer a small gain for 
their country to a much greater gain for the world at large, 
if they insist that their governments shall be actuated by 
the dominant desire to secure for them as large a share as 
possible of the limited resources of oil, rubber, iron, copper, 
and other important materials, if necessary by annexing 
(under whatever title they disguise the process) the best 
supplies, no verbal outlawry of war, no arbitration treaties, 
no disarmament conferences, will give security of peace. 
Socialists often insist that modern imperialism, the conflicts 
it engenders and the oppressions it exerts, are entirely the 
products of a capitalism within the several nations which 
utilise the political and fighting forces of the country for 
gains in which the people have no share. Substantially this 
statement is correct, but it ignores the sentimental and 
genuinely moral support accorded to the policy by the 
peoples. 

§ 5. The issue thus turns out to be one of the limitation 
of the effective area of community, in its kernel a moral issue, 
though closely linked up with external conditions of human 
intercourse. If, as so able a thinker as the late Mr. Bernard 
Bosanquet maintained, the nation-state is and must remain 
“the widest organisation which has the common experience 
necessary to form a common life”, 1 the extension of the area 
1 Philosophical Theory of the State, p. 320. 


398 


ECONOMIC INTERNATIONALISM 


of community here desiderated is impossible, and the world 
economy cannot become a definitely purposive system. Rut 
surely the general trend of modern life, not merely on the 
economic, but on the cultural plane, is towards a widening 
of “common experience”, beyond the limits of a nation. To 
a larger and larger number of persons the conception of 
mankind and the world as wholes comes to have a clearer 
meaning. A vast web of associations, business, scientific, 
hygienic, artistic, philanthropic, last, not least, athletic, is 
woven across the national barrier, bringing into personal and 
spiritual contact and cooperation an ever increasing number 
of the active persons in the several nations. 

But while admitting the importance of such extensions of 
what Bosanquet terms “the common experience necessary 
to form a common life”, as nutriment to a super-national 
mind, I would enter a protest against the assumption that 
our sense of the rights and obligations of humanity is formed 
entirely by such actual contacts. A sense of equity, of what 
is due to others, can have a strong purchase upon our will 
and our conduct, though we have no direct contact with 
these ‘others’, and do not even know who they are. A sense 
of equity will prevent us from discriminating unfairly in 
favour of those who come within the range of our “common 
experience”, and against those who do not; it will make us 
recognise and ‘allow for’ the bias in favour of our friends 
when the claims of friendship should not count. Justice 
has its absolute appeals, to the intellectual and aesthetic, 
which forbid us to sacrifice the interests of an unknown many 
to a known few, however strong the appeal of personal sym¬ 
pathies may be. It is the enforcement of this claim for a 
clear dispassionate justice that is the first desideratum of 
moral education. Much more than this is wanted to give 
vigour to a normal life: but active social sympathies, with¬ 
out the guidance of this cool sense of equity, a calculation of 
what is due to each, are certain to run to moral waste, if not 


ECONOMIC INTERNATIONALISM 


399 


to moral havoc. But for effective human cooperation, of 
course, more than this equitable principle is needed, and 
the fund of actual knowledge about foreigners furnished by 
this ordinary web of associations is of immense service. For, 
as it becomes more evident that the peace and prosperity 
of every nation depend upon policies that demand effective 
international cooperation, this knowledge must itself furnish 
a potent moral stimulus towards the cultivation of the wider 
human sympathy. Thus everywhere do facts and feelings 
play into each other’s hands. 

§ 6. It must, however, be understood that the moral 
struggle remains exceedingly acute. For it is not sufficient 
that the loyalty to one’s nation shall be supplanted by the 
wider feeling for humanity. The question of conflicting 
loyalties arises. The hundred-per-cent patriot prefers the 
good, or the supposed good, of his country to that of the 
world. The humanist position demands that the wider 
loyalty must prevail. Where areas of allegiance are or¬ 
ganised, as they must be, for effective cooperation, this sig¬ 
nifies that a federal system must develop in which the final 
voice is vested in the federal government. Approaching this 
critical issue, as we do here, from the standpoint of economic 
life, it posits the authority of some international government 
competent to deliver The economic goods’, i.e., to control the 
development of world-resources in the interest of humanity. 
So gigantic a proposition must not be permitted to appall our 
minds. It is not the slogan for a sudden revolution in the 
behaviour and the minds of men, but the plain affirmation 
of the distant goal to which many movements are converging 
from different parts at different paces. 

The goal, or ideal, itself derives its validity from the same 
principle which is the ruling element in all forms of com¬ 
munity, the essence of all economy, viz., distribution of work 
and wealth in accordance with ability to make and enjoy. 
If the world for economic purposes could be organised upon 


400 


ECONOMIC INTERNATIONALISM 


this principle, its natural resources, assigned to the cultiva¬ 
tion of the inhabitants of the various countries, according 
to their capacities, and supplemented where necessary by 
suitable drafts from other countries: a broadcasting of the 
pooled skill and technique and organising power available 
from all world-sources, a central distribution of capital, a 
common saving fund, available according to the industrial 
needs of different countries and industries, the world would 
then be raised to the level of its highest productivity. If, 
also, this greatest economic product were able to be distrib¬ 
uted, or rationed, according to the diverse needs, or capaci¬ 
ties of enjoyment of the members of this world community, 
such an economy of production and consumption would yield 
a maximum economic contribution to human welfare. 

§ 7. There would still remain for settlement the important 
problem of ascertaining the right relations between economic 
and non-economic welfare, how much of the energy and in¬ 
terest of life should be devoted to distinctively economic 
activities. Upon this topic, however, I touch in the final 
chapter. It need not trench upon our consideration of the 
place of economic government in world-community to which 
we here address ourselves. 

Though any such international economic government as 
we have just imaged may seem to imply impossible condi¬ 
tions, first, the enthronement of an enthusiasm of humanity, 
in the place of the narrower interests and loyalties of country, 
class, family, and self; secondly, the creation of federal ad¬ 
ministrative apparatus competent to deal efficiently and 
honestly with the enormous complexities of this world 
economy — though these two conditions may seem to remove 
our image from any claim to be an operative ideal, even for 
some remote, far off, and partial realisation, I venture to 
set out a few practical considerations in extenuation of so 
abrupt a dismissal. 

Though statecraft is very slow to realise the definitely 


ECONOMIC INTERNATIONALISM 


401 


economic character of the Vital interests’ which figure on 
the stage of diplomacy, and is still disposed to paralyse Peace 
Pacts by reserving from their purview just those issues which 
imperil peace, there is a large growing public in every coun¬ 
try that is more or less alive to the lessons of the war and the 
post-war situation. This mind, so far as it is informed, runs 
on the following lines. 

If the struggle of rival imperialisms and their economic 
policies continues, no serious hopes or expectations of lasting 
world-peace can be entertained, for all the seeds of strife 
remain in the world system. On the economic side, the 
‘national’ struggles for raw resources such as oil, rubber, 
copper, the deficiency of foreign markets adequate to take 
the export surpluses which depressed trades in industrial 
countries could produce, the visible wastes of manufacturing 
power thus revealed, the raising of tariff walls and other 
aids to home industries at the expense of foreigners, the pay¬ 
ment of war-debts by poorer nations to richer, the harassing 
fluctuations of foreign exchanges — all these factors feed 
international fears, suspicions, envies, and hatreds. The 
only escape from these moral and economic wastes and perils 
is by way of organised economic internationalism. 

This can conceivably come about in one of two ways. 
Since political divisions have in themselves no economic 
significance, international cooperation may proceed by mu¬ 
tual agreement between groups of financiers and industrial¬ 
ists in different countries to extend their organizations across 
their national barriers, for profitable economies of produc¬ 
tion and marketing. The trust and cartel movement by 
which combination displaces or restricts competition has 
already shown a tendency to extend its area beyond the 
nation, coordinating the production of many units by a 
specialisation of processes accommodated to the geographical 
and other facilities of different countries, and by a rationing 
of the sources of supply of raw materials. Even before the 


402 


ECONOMIC INTERNATIONALISM 


war such international combines existed in a number of 
industries, such as steel rails, Atlantic shipping, and incan¬ 
descent lamps. Now there are many more, and bodies like 
the International Chamber of Commerce regard them as 
normal, necessary outcomes of the new economic situation. 
Apart from the economies of standardised production, they 
carry great economies of marketing and transport. If the 
controllers of big business by thus getting together could 
substitute harmonious and profitable cooperation for the 
wasteful economic conflicts which in the past have carried 
such grave political consequences, the interests both of peace 
and productivity might seem to be secured. 

To many this appears to be the only practicable line of 
advance. Big business alone possesses the organising power 
and the political influence that are necessary. For this ad¬ 
vance, though essentially economic, cannot dispense with 
political action. While for some purposes it may disregard 
tariff barriers, its general interests are definitely opposed to 
such interferences with free trade and the commercial divi¬ 
sion of labour that it serves. So, likewise, in dealing with 
sources of supply and markets in backward countries, this 
international capitalism will need the combined action of 
the imperialist states. As capitalism generated imperialism, 
this intercapitalism will generate an inter-imperialism. 

The net effect of this entire process, carried far enough, 
would be to substitute a new cleavage for the old class cleav¬ 
age between capital and labour in the several countries. 
Western industrial civilisation, organised internationally 
under industrial, commercial, transport, and financial cartels, 
would exploit the tropics, and other backward countries con¬ 
taining or receiving supplies of cheap submissive labour, for 
the benefit primarily of profit-making syndicates, but, 
secondarily, of the skilled white labour in the final manufac¬ 
turing processes and other economic services still retained 
in the Western world. An economy of high wages, short 


ECONOMIC INTERNATIONALISM 


403 


hours, and other good conditions for Western labour could 
conveniently be provided out of the surplus gains and econo¬ 
mies which such an inter-imperialism might provide. 

This would not be an ideal human economy. For it would 
contain no safeguards of the interests either of workers or 
consumers, except such as the fears, or the interests, or the 
voluntary good will of a capitalist oligarchy might provide. 
Prices and wages, in other words, would be fixed by the 
arbitrary will, or calculated gains, of groups of able business 
men, with no effective power of resistance from their em¬ 
ployees or the consuming public. Though our analysis has 
disposed of the assumption that intelligent profiteers must 
in their own interest always pay good wages and fix ‘reason¬ 
able’ prices, we may admit that for such an economic oli¬ 
garchy to work safely in our time, limits must be set upon 
the abuses of the wage and price systems which would be 
technically possible under such a system. 

The human defects of such a system are evident. It is in 
effect an economic despotism. No real power of economic 
self-determination is vested in the vast majority of produc¬ 
ers or consumers. The maldistribution of the product, 
through the successful operation of the profiteering motive, 
would necessarily place a limit on the economy of high pro¬ 
ductivity, which is the main recommendation of the system. 
As in single trusts, or combines to-day, it would continue to 
be profitable to restrict production. Apart from this, the 
human value represented by any increased productivity thus 
attained would be diminished by the lack of any adequate 
security for minimising the human costs of its production 
and maximising the human utilities of its consumption, a 
necessary implication of the profiteering system. 

§ 8. The only economic internationalism which can com¬ 
mand our moral assent runs upon different lines. It consists 
in an extension of the progressive principle of distribution 
of productive resources and products according to ability to 


404 


ECONOMIC INTERNATIONALISM 


use them, and it demands that the participants in such an 
economy shall have some free expression of their ‘selves’ in 
its operation. It signifies a gradual persistent working 
towards an organised business policy which shall, for pur¬ 
poses of production and consumption, treat the principal 
economic resources, both natural and human, as unitary 
world supplies to be operated for the benefit of mankind as 
a whole, not for the exclusive or predominant benefit of the 
particular nation, or other groups, within whose area of 
occupation the economic resources in question happen to lie. 
In other words, the ideal ‘natural harmony’ or interests to 
which economic idealists of a century ago looked for the 
cooperation of the world, must become a conscious calcu¬ 
lated policy of modern internationalism. The meagre ex¬ 
perimental beginnings of such a policy may be traced in the 
economic surveys of world resources which emanate from 
the Economic Commissions at Geneva, from various private 
international organisations of bankers, traders, and indus¬ 
trialists, and from groups of economic students in universi¬ 
ties and elsewhere, from the labours of the I. L. 0. for the 
standardisation of conditions of labour in different countries, 
and, last not least, from the growing participation of govern¬ 
ments and groups of bankers in projects for the regularisa- 
tion and improvement of the monetary system of the world. 
The principle that the disposal of supplies of important foods 
and raw materials shall not be left to the arbitrary will of 
groups of exporters in the several countries, bargaining with 
importers in other countries, but shall be distributed, or 
rationed, according to some general estimate of the respec¬ 
tive needs of importing nations, was adopted by the allied 
governments during the emergency of war-time, and the 
financial resources required for the administration of this 
policy were furnished from a general fund. This war-com¬ 
munism was justified as a moral and economic necessity, 


ECONOMIC INTERNATIONALISM 


405 


and was in part retained during the period of economic 
stringency that followed the peace. Though few suggested 
that it was practicable to retain, extend, and regularise such 
an economic policy for employment after the emergency had 
passed, the moral lesson of a needs basis of distribution 
which it furnished will not have been altogether lost. Quite 
evidently it is a legitimate extension of the ethical and eco¬ 
nomic maxim of distribution which we recognise is gradually 
forcing its way to authoritative recognition within the sys¬ 
tems of most civilised nations, displacing the crude selfish¬ 
ness of distribution according to ‘pulls’. 

At present the possibilities of an effective realisation of 
such a world-policy are slight and slow. Hard-shell nation¬ 
alism, with its ‘hands off our resources’ and ‘may we not do 
as we like with our own’, holds dominion over the hearts and 
even the intelligence of most men in most countries, and the 
moral and intellectual forces of education through many 
channels are prostituted to the obsolete traditions of an 
obstructive sovereignty. The higher loyalty of world-wel¬ 
fare has a long struggle before it to win that measure of 
genuine acceptance needed to impose its claims effectively 
upon the institutions and policy of economic international¬ 
ism. Nations which are not yet seized of the obligation to 
give equality of economic opportunity to one another in 
their markets, are as yet quite incapable of the higher ob¬ 
ligation to regard their natural resources and powers of pro¬ 
duction as a moral trust, to be administered, not for the 
exclusive advantage of their own members, but for the bene¬ 
fit of mankind, as estimated by some representative federal 
authority. 

Yet wildly impracticable as such a suggestion may seem, 
I should regard it as a gross dereliction of a plain intellectual 
duty, were I to fail to register my conviction that nothing 
less than the establishment of such a super-national federa- 


406 


ECONOMIC INTERNATIONALISM 


tion can in the long run satisfy the equities and economies of 
the world in which we live, and secure the moral and material 
welfare of humanity. However slowly and doubtfully, and 
with however many stoppages and retrogressions, mankind 
in, through, and above its national groupings, must gradu¬ 
ally accomplish this moral mastery of its economic destiny. 


CHAPTER IX 

USES AND ABUSES OF MONEY 

§ 1. In a treatise concerning the relations between eco¬ 
nomic and ethical or human values it may seem strange that 
all formal discussion of the place occupied by money should 
be deferred to the close of the enquiry. For money is not 
only the measure of all economic wealth, and the medium 
of all economic activities. It is the abstract form and dis¬ 
tillation of all economic values. For this very reason I have 
kept it to the last. The human significance of the diverse 
activities constituting economic life, and of the goods it is 
concerned with producing and consuming, could only be 
estimated by the concrete method of approach here adopted. 
A direct confrontation of money value with human value 
would have been quite illusory, for all the humanity has 
already been extracted from economic goods and processes 
when they have passed into the money form. 

None the less the influences of money upon the human 
economy of values are of profound significance for us. But 
in studying these influences we resolve once more the ab¬ 
stract value into the work it does upon the human mind 
and upon the economic system. Though these two influences 
overlap and interlace, it is best to approach them separately. 

The psychology of the monetary appeal to man’s mind 
is full of interest and is not so simple as it appears at first. 
The discovery of money as a single depository of value and 
medium of exchange is probably the most educative, morally 
and intellectually, of all human inventions with the possible 
exception of fire and the printing press. Civilisation con- 


407 


408 


USES AND ABUSES OF MONEY 


sists mainly in putting people and things together, physically 
and mentally, and money has been chief helper in this work. 
Human intercourse, as history shows it, could not have passed 
effectively beyond the limits of small local groups without 
money. The whole economy of division of labour and co¬ 
operation rests upon this basis. It gave a man a sense of 
security and confidence in distant and even personally un¬ 
known men, and a power over his own future which nothing 
else could give. Though credit is deemed a modern develop¬ 
ment of money, it is in reality the moral meaning of all money 
from the very start. For the confidence in other men’s will¬ 
ingness and ability to give him the sort of goods he might 
want to consume, now or in the future, is the kernel of the 
monetary system. Money has by this strictly moral influ¬ 
ence bound man to his fellow men and man’s past to his 
future. 

Money thus becomes at once the symbol and the instru¬ 
ment of economic power, the power to make other people 
work, in order that we may enjoy the fruits of their labour. 
It is true that we can normally acquire this power only by 
having ourselves worked for other people’s enjoyment. But 
none the less the actual property in money functions psycho¬ 
logically as a sense of power over others. It is, as we said, 
both an instrument and a symbol. In both aspects it may 
become an object of worship, auri sacra fames. To the 
miser the symbol has actually swallowed up the reality for 
which it stands: the glitter and the tinkle of the coins ex¬ 
ercise a mystical charm upon his ears and eyes. Some dim 
sense of the power they symbolise may still survive in his 
mind, but it is deeply embedded and sterilised for action. 
He cannot bring himself to part with the coin in order to 
exert its power and get the coin’s worth. Whether this force 
of symbolism will survive the substitution of paper for coins, 
its rustle giving the same joy as their tinkle, may be matter 
for speculation. Probably not. For some literally hypnotic 


USES AND ABUSES OF MONEY 409 

influence may attach to the ogling of small bright round 
coins. 

But if the miser’s attitude towards money is irrational, 
what of his opposite, the spendthrift to whom money is 
nothing but the quick instrument to present unmeasured 
satisfaction? His irrationality is of a different order. It 
ignores what we may call the primary meaning of money 
as a store of value. For the essential character of a store is 
that of considered use over a period of time, and the spend¬ 
thrift brings no consideration to the relative importance of 
his purchases, but ‘blows it now’. These contrasted char¬ 
acters contain perhaps in themselves a significant commen¬ 
tary upon the defective working of the economic system by 
which money comes so hardly and so slowly to some, to others 
so lightly and so quickly. For the miser naturally belongs 
to the former type, the spendthrift to the latter. 

§ 2. But it is more germane to our purpose to point out 
how the essential characters of irrationality which stand out 
so strongly in the miser and the spenthrift attach in less 
degree to the attitude and dealings of most of us regarding 
money. The young soon learn from the conversation of their 
elders that money is somehow different from and superior 
to other sorts of property, that selling is in some way more 
commendable than buying, and that the possession of much 
money gives a dignity and importance to the possessor quite 
apart from enabling him to buy anything he wants. In a 
world where business is so predominant an interest, and the 
struggle for a livelihood occupies so large a part of human 
thought and energy, the money concept naturally comes to 
occupy a special niche of honour in our mind. Safety, power, 
enjoyment, leisure, for ourselves and for those dearest to us, 
are packed into this concept. Though we may believe that 
we only value money for the utilities and satisfactions it can 
procure for us, the very variety and importance of these ends 
secretly endow the means with a value of its own. Nay, the 


410 


USES AND ABUSES OF MONEY 


very physical character of money, its durability and com¬ 
pactness, impresses on us the permanence and stability of 
this value. So firm is this confidence, so revered the thing 
that inspires it, that even when experience shows our money 
shrinking in its buying power, our first inclination is to find 
the explanation and the blame on the commodity side of the 
equation not in the money. Indeed, this naive confidence 
in money helps to salve many an economic sore. “Between 
1896 and 1914 — the investor had already suffered a serious 
loss — the capital value of his annuity had fallen by about a 
third, and the purchasing power of his income had also fallen 
by nearly a third”, writes Mr. J. M. Keynes of investment 
in British Consols. 1 The substantial nature of this loss, 
however, was little realised, partly because it was so gradual, 
but largely because the nominal monetary value of the 
investment remained unaltered. Even the swifter loss of 
the war-period has not been fully realised in consciousness. 
People feel much more acutely the money actually taken 
from them in income taxes, than the greater loss due to rising 
prices. This is certainly attributable in part to a supersti¬ 
tious, unreasoning regard for and belief in money. It is, 
however, by no means confined to the investing classes. 
Take the issue as between money and real wages. No worker 
pays due regard to the fluctuations in purchasing power of his 
money wages. If his weekly money wage remains unaltered 
he will accept with an almost stoical indifference the rising 
prices that reduce its commodity value. On the other hand, 
he will fight to the death any proposal to reduce his money 
wages, though prices may be falling so rapidly that he can 
purchase as much, or even more, with the reduced sum. 
Though such refusal may be partly sound tactics in his 
struggle for a larger share of the national dividend, it is 
manifestly due, in part, to concentration upon money rather 
than on money’s worth. 

1 A Tract on Monetary Reform, p. 14. 


USES AND ABUSES OF MONEY 


411 


§ 3. Public policy has notoriously been infected by a 
similar unreason. One need here only allude to the large 
element of superstition in the mercantilist theory and policy 
and its survival in the modern notion about a favourable 
balance of trade. For the individual business man, or firm, 
there is perhaps in normal times a greater urgency to sell 
than to buy, for the exchange of specific goods for money 
gives greater liberty in planning and more control over 
future operations. But for a nation, as an aggregate of busi¬ 
ness men, no such urgency exists, though one effect of pre¬ 
senting international trade in national balances, which 
suggests that America, Great Britain, France, and Germany 
are trading concerns, is to foster this illusion. Its absurdity 
presents two faces, counterparts. The first is that of a 
country so afraid that its citizens will be enriched by receiv¬ 
ing quantities of foreign goods for which the countries from 
which they come refuse to take payment in the only form 
in which payment is possible, that it tries to stop them coming 
in by tariffs or by prohibitions. Though a protective system 
assumes quite other guises and purposes to most of its de¬ 
fenders, it is rooted ultimately in the illusion that if foreign 
goods are admitted freely, they cannot and will not be paid 
for in goods made in the recipient country and going out in 
export trade. For since few countries mine the precious 
metals and can thus make direct payment in money, there 
is no other means of paying for imports except by exports. 
To give any show of rationality to such a policy one would 
have to suppose, upon the one hand, a belief that foreigners 
will go on sending us goods gratuitously, upon the other, that 
this parasitic life of ours is not recognised as degrading to 
our national character, by forcing us to live upon charitable 
contributions from strangers. 

The other face of this absurdity is shown by the United 
States, chief agent of this undesigned charity, so embar¬ 
rassed by attempts of foreign nations to make honest pay- 


412 


USES AND ABUSES OF MONEY 


ment for goods supplied, that she will neither take their 
goods nor keep their gold, but hands it back to them to use 
for their own purposes, retaining only paper liens upon ever 
growing quantities of foreign wealth which she can have 
no serious intention of ever claiming for her own. 

§ 4. But money is not what it was. Indeed, one of the 
direst consequences of the Great War has been the blow 
struck everywhere at the moral confidence in money. The 
economic system everywhere is still reeling from that blow. 
The central meaning of money, as we have seen, is that of a 
store, giving us a safe command of future consumables. 
Saving, except to the meagrest extent, is impossible on any 
other terms. What the war did was to ‘loot’ this store and 
so destroy the confidence in saving for investment. All 
savings do not, of course, come in this category: but saving 
for a fixed interest plays so important a part in a sound 
economy that such an injury ranks as a moral disaster of 
the first order. Mr. Keynes thus describes the fate of whole 
bodies of these middle-class investors. 

“Before the war these medium fortunes had already begun 
to suffer some loss (as compared with the summit of their 
prosperity in the middle ’nineties) from the rise of prices and 
also in the rate of interest. But the monetary events which 
have accompanied and followed the war have taken from 
them about one-half of their real value in England, seven- 
eighths in France, eleven-twelfths in Italy, and virtually 
the whole in Germany and in the succession states of Austria- 
Hungary and Russia.” 1 

It may perhaps be urged that these losses of investors and 
creditors carried a corresponding gain to debtors, including 
the businesses thus relieved from the burden of interest on 
their debentures and fixed interest shares. In a measure this 
is true, and the rapid recovery of certain businesses in Ger¬ 
many and Austria is undoubtedly attributable, partly, to 
1 Op. cit., p. 14. 


413 


USES AND ABUSES OF MONEY 

this relief. But even with this allowance an immense dam¬ 
age was inflicted upon the economic system as a whole. 
Thus to endow the debtor classes of the community at the 
expense of the creditor classes strikes a double blow at 
economic equity and reason. For the former have no more 
right to gain than the latter have to lose. Both are demoral¬ 
ised by a reversal of their reasonable expectations, and are 
economically injured by receiving so much more or less than 
they ought’ to receive. The miseries of the sober saving 
classes are in no sense compensated by the wasteful ex¬ 
travagances of war-profiteers. The saving habit is definitely 
weakened for the future. Fluctuating prices alike for goods 
and for securities have everywhere fed and stimulated greed 
and speculation, while the controllers of finance have 
strengthened their hold upon the industrial and commercial 
system for purposes of profitable manipulation of supplies 
and securities. The prime use of money, as a safeguard of 
value and a facile instrument of exchange, is that it enables 
and incites men to industry and economises their efforts by 
giving them an assurance that they will be able to dispose of 
their product on foreknown and fair terms. But fluctua¬ 
tions of prices that are quick, violent, and incalculable, force 
everyone to worry about economic processes that should be 
automatic and unconscious, and so disable them from the 
smooth performance of their work. Here is a new subjective 
cost involving an actual waste of economic productivity. 

By such fluctuations, moreover, the distribution of wealth 
is made more irrational and more unjust, and the sense of 
this unreason and injustice is grit in the working of the in¬ 
dustrial system. 

The abolition of these psychological stresses and their 
accompanying economic injuries, and the reduction of money 
processes to a routine, for all except those called upon to 
administer these processes, is one of the most urgent needs 
of our time. 


414 


USES AND ABUSES OF MONEY 


§ 5. Thus far we have treated money mainly in its psycho¬ 
logical aspects, recognising the moral and intellectual dam¬ 
ages of an unregulated money. It becomes evident that if 
the dictates of reason and justice regain a conscious social 
control of the economic system, money must be a chief in¬ 
strument of that control. For every critical act in the eco¬ 
nomic process involves, is motivated by, and is measured in, 
money. Modern cost-taking and book-keeping, indeed, 
claim to express in exact quantitative form all that immense 
variety of activities of human brain and muscle that con¬ 
stitutes the operative economic system. The paramount 
importance of a sound monetary system, readily and accu¬ 
rately adjustable to the changing needs of the economic 
system, is unanimously admitted. But three issues relating 
thereto are much debated, the aim of monetary government, 
the authority to exercise that government, and the methods 
it shall employ. Shall we say that the aim of monetary 
control is to secure a supply of money, when and where it is 
wanted, that will enable sales of goods and services to take 
place, and contracts to be made, on terms that conform to 
the reasonable expectations of the parties to such sales and 
contracts, and to the public interest in the efficiency and 
productivity of the economic system thus operated? But 
what supply of money does conform to such ‘reasonable ex¬ 
pectations’ and such 'public interest’? Here we open up a 
curious controversy upon the desirability of stabilising the 
price-level, if it can be done. The stabilisers are favoured 
in their appeal by the admitted evils of such violent fluctua¬ 
tions of prices as have recently occurred owing to the in¬ 
flations and contractions of currency and credit. But con¬ 
demnation of violent and dishonest changes does not commit 
us to the repudiation of all changes. 

Assuming that the general price-level can be stabilised 
by the management of money, either on the lines advocated 
by Mr. Irving Fisher, or by some international regulation of 


USES AND ABUSES OF MONEY 


415 


credit, such as the late Professor Lehfeldt advocated, would 
such stabilisation meet the ‘reasonable expectations’ of all 
parties to a sale or contract, and serve the public interest? 
Take two alternative cases. First, take an economic com¬ 
munity (whether a single country or the economic world), 
in which industry as a whole is making so much progress, 
owing to improvements in technique and organisation, cheap 
power, and controlled population, that a considerable re¬ 
duction of the real and money costs of production is taking 
place in most industries. The normal result of this lower¬ 
ing of costs would be to increase the output of goods and to 
reduce their prices, and unless this movement was compen¬ 
sated by a sufficient rise of prices in important industries 
conforming to the ‘law of diminishing returns’ there would 
be a fall in the general price-level, such as was actually 
taking place during the period 1870-1895, in most industrial 
countries. If the monetary system enables this general re¬ 
duction of prices to take place, all members of the community, 
in their capacity of consumers, appear to share in the gain 
from reduced costs or increased productivity. Wage-earn¬ 
ers will gain in the higher purchasing power of their money 
wages unless these wages are reduced in consequence of fall¬ 
ing prices, and the resistance to such wage-cuts during a 
period of admitted high productivity and prosperity would 
be at its strongest. Recipients of fixed interest-payments, 
rents-, and pensions, would also gain. Profits, it will be 
said, the reward of business initiative and enterprise, will 
be reduced, or will not make the large advances that would 
have accrued if prices had not fallen. But this contention 
assumes that aggregate net profits would be higher if pro¬ 
ductivity were restricted, and a smaller supply were mar¬ 
keted at higher prices. Now though this will be the case in 
certain sorts of goods the elasticity of demand for which 
is great, it has no general applicability. It would not pay 
the capitalist controllers of industry as a whole to cramp 


416 


USES AND ABUSES OF MONEY 


its productivity, so as to maintain the price-level, and take 
a larger percentage of profit from a smaller aggregate of sales. 
For their money-profits even if thus increased, would be 
scaled down in economic values by their lower purchasing 
power. 

A gradual decline of prices thus brought about by a re¬ 
duced cost of the units of supply, would distribute the gains 
of industrial progress throughout the whole community in 
proportion to money-incomes. Though this is not an ideally 
equitable distribution of what may be termed the fruits of 
economic progress, since it does not correct the maldistribu¬ 
tion of money incomes, it does secure for all members some 
share of the gain. 

A further aspect of this fall in price-level demands atten¬ 
tion. All industries do not share equally in this fall, attribu¬ 
table, as it is, to reduced costs per unit of production. Some 
industries, indeed, may show no fall but a rise in marginal 
costs. Their prices may be rising though the general price- 
level falls. Such may be the case with some important in¬ 
dustries producing foods and raw materials. In such a 
period, if the falling prices in the manufacturing industries 
so stimulated purchases that the same proportion of the 
general income as before were spent in buying increased 
quantities of these manufactured goods, the price-level would 
fall fast. But if the wants of large bodies of consumers for 
these manufactured goods neared saturation point, they 
would divert some portion of their enlarged purchasing power 
from these goods to foods and other goods or services the 
prices of which showed no tendency to fall. The increased de¬ 
mand for goods conforming to the law of diminishing returns 
would raise their prices. The increasing proportion of in¬ 
come spent upon such goods would counteract the effect of 
falling prices in the manufacturing industries. It would 
also tend to draw an increasing proportion of capital and 
labour into these industries with rising prices, by making 


417 


USES AND ABUSES OF MONEY 

them more profitable employments. At any rate, it would 
check the tendency to starve agriculture and rural industries 
ior the growth of manufactures and city occupations. This 
compensating movement must to some extent explain the 
reversal of the price movement which took place after 1895. 
A larger proportion of the population of the world entered 
on a wheat diet and otherwise increased its consumption of 
the more costly foods and raw materials. This fact was 
testified by the growing advantage in exchange of the food- 
producing countries over the manufacturing countries. Now 
the point that interests us here is that the economic system 
appears under our unstabilised currency to provide a natural 
check upon a fall in the price-level, where the tendency to 
such a fall is due to reduced costs of production. By a trans¬ 
fer of purchasing power, from articles whose falling prices 
brings them down to saturation point to articles whose rising 
prices keeps them relatively ‘scarce’, a compensation is 
effected. Some fluctuation of the price-level is, no doubt, 
involved in this compensatory movement, but it need not be,' 
generally is not, violent or rapid, and, due to intelligible 
causes related to the productivity of the several industries, 
should be fairly predictable. What happens, in the broad, 
is this. The gain from higher productivity, or lower costs, 
in the manufacturing industries, is taken by the consuming 
public, partly, in increased consumption of these manufac¬ 
tured goods, partly, in increased consumption of foods and 
other goods conforming to a higher cost, or lower produc¬ 
tivity, economy. Assuming that the felt wants and desires 
of men are on the whole sound guides to economic conduct, 
this result is satisfactory. 

§ 6. How would a stabilising policy operate in such a 
case as we have taken? In order to check the falling level 
of prices, due to some large rapid economies in the manufac¬ 
turing processes, more money must be pumped into the eco¬ 
nomic system and put into effective circulation as purchasing 


418 


USES AND ABUSES OF MONEY 


power. How this additional money will be applied as pur¬ 
chasing power will depend, no doubt, upon how it is dis¬ 
tributed. If, as is commonly supposed, it passes into use, 
partly, through cheaper and larger bank credits issued to 
business men for business uses, partly, through the purchase 
by the issuing bank of securities from persons who will use 
the money they receive, not to buy other securities but to buy 
capital goods or consumptive goods, its first effect would 
appear not favourable to the end it sought to compass. The 
first result of this cheaper money would certainly lean to¬ 
wards an increased demand for capital goods in large measure 
enjoying the economy of high productivity. If its second¬ 
ary effect, as it passed into wage incomes in the stimulated 
industries, was to evoke increased demand for foods and 
other high-priced goods, it would pro tanto operate as a 
stabilising influence. But it is by no means assured that 
the increased volume of money would be applied predomi¬ 
nantly to the purchase of goods conforming to the law of 
diminishing returns and rising prices, the result desiderated 
by stabilisers. If it were not so applied, it would not help 
to expedite the adjustment which we have seen is provided 
by the natural play of human wants so far as these can 
operate through effective demand. 

If this argument is sound, it does not appear that a stabili¬ 
sation of prices by managed currency is needed to deal with 
changes of price-level due to the rise or fall of productivity 
in the various industries, or can contribute anything service¬ 
able to the natural process of adjustment which tends to 
correct such fluctuations. 

Nor is it evident that such stabilisation would make dis¬ 
tribution of incomes more equitable. When a fall in the 
price-level, due to reduced costs and increased productivity, 
would have taken place, the stoppage of such fall would 
favour debtors at the expense of creditors, by enabling the 
former to pay back a smaller quantity of goods than they 


USES AND ABUSES OF MONEY 


419 


would have had to pay if prices had been allowed to fall. 
Thus they would keep for themselves the whole gain from 
industrial progress. All recipients of fixed incomes, deben¬ 
ture holders, preference share-holders, mortgagors, pension¬ 
ers, and salaried officials, would, except so far as they could 
force a readjustment, be losers, the whole gains of industrial 
progress passing to borrowers, ordinary share-holders, prof¬ 
iteers, and such groups of wage-earners as were strong 
enough to raise their money-wages. 

If, on the other hand, stabilisation were directed to stop 
a rise in the price-level due to adverse economic circum¬ 
stances, this balance would be reversed. Creditors and all 
fixed income recipients would gain at the expense of debtors 
and ordinary shareholders, in terms of real wealth. Stabili¬ 
sation under either of these two situations would seem to 
distribute the gains of industrial prosperity or the losses of 
adversity more equally than if the natural fluctuations of 
price-level had been allowed to take place. 

§ 7. The case for stabilisation, however, in respect to 
fluctuations of price-level due to operations on the monetary 
side, whether of inflation or deflation, bears a different com¬ 
plexion. The makers of money, purchasing power, are 
governments and private credit-making businesses, such as 
banks and finance houses. The history of money-making in 
all ages, has shown dishonesty and inefficiency far exceeding 
those in any other department of economic life. Bad money 
evidently poisons the entire economic system, whether the 
badness lie in debased quality or in unregulated quantity. 
The debased coinage issued by kings or governments was, of 
course, the meanest form of robbery on a colossal scale. 
This crude practice had virtually disappeared with the use 
of paper money, bank notes, and cheques as purchasing 
power. But the crooked practices of governments have not 
disappeared. The Great War showed that every civilised 
government under pressure of emergency was willing to take 


420 


USES AND ABUSES OF MONEY 


wealth from its people by secret extortion instead of by 
honest taxation. Every government either fabricated 
money, or incited banks to do so, so as to enable them to 
purchase larger stores of munitions and other war goods 
than they could have purchased out of current sources of 
public revenue. This inflation by manufactured money was 
just common cheating due to cowardice. It did not enable 
governments to get anything they could not have got by 
honest pressure of taxation, or by commandeering. But it 
had the effect of raising prices rapidly, disturbing all busi¬ 
ness expectations, introducing a gambling spirit into all 
business processes, and enabling sharp greedy men to thrive 
on the misfortunes of their simpler fellow-men. In the 
countries of Central Europe, where it was carried furthest, 
it impoverished whole classes of deserving people, stopped 
industry, caused wide-spread starvation, and demoralised 
all marketing, from high finance down to the smallest retail 
trade. By the famines and industrial disorders it induced 
it probably slew more people than the war itself, and brought 
more misery. Its cure, by restoration of a fixed value for 
money, on a gold standard, has been only less painful than 
the disease itself. Even in Britain where the disease was 
comparatively mild, the remedy has inflicted heavy injuries 
upon our staple export trades. 

§ 8. It will be urged, with a good deal of reason, that this 
abuse of the money-making power by governments is in 
modern times a rare abnormality, and that so far as gov¬ 
ernments control the monetary system their normal policy 
is to issue honest money to meet the requirements of the 
trading public. It will be pointed out that such fluctuation? 
of the price-level as appear to be due to monetary causes 
are attributable, not to government money, but to credits 
issued by bankers and other financiers, whose cheques and 
paper form by far the largest source of modern purchasing 
power. 


USES AND ABUSES OF MONEY 


421 


Modern money-reformers chiefly address themselves to the 
regulation of credit. Their complaint is that bankers, the 
main issuers of credit, cause injurious fluctuations in the 
price-level by the way in which they increase and restrict 
the issue of this credit. Their action is attributed, partly, 
to ignorance of the effects of their bank policy, partly, to 
some discrepancy between their business interests as bankers 
and the interests of the wider business public which they 
affect to serve. There is no suggestion that bankers are 
either less intelligent or more regardless of the public interest 
than other business men. But the play of the forces which 
they liberate by credit-issue is more obscure and intricate, 
and any error of judgment or any preference of private gain 
to public policy is more injurious. The difficulty of assessing 
bank policy in the light of public service is illustrated by the 
disagreement among economists upon the nature of credit¬ 
making. One school seems to hold that bankers (like their 
predecessors, the goldsmiths) simply lend out a large pro¬ 
portion of the funds entrusted to them, on a careful calcu¬ 
lation of the pace at which they will be reclaimed, and make 
their gains by charging a higher rate of interest to those who 
borrow from them than they pay to their depositors. Others 
hold that bankers, utilising the currency part of their deposits 
and their subscribed capital and reserves as a basis, issue 
an amount of credit which at times largely exceeds the total 
of these deposits and bank assets, reckoning that the state of 
trade enables them to pursue this profitable course with 
safety. 

If the former view be taken as correct, it is difficult to see 
how bankers can ever be accused of inflation. For as Mr. 
D. H. Robertson shows so clearly, 1 “The twin processes of 
real saving and the creation of bank money are seen ... to 
be proceeding concurrently, bound together by real though 

1 D. H. Robertson, Money, chap. IV, p. 79 (Cambridge Economics 
Handbooks). 


422 


USES AND ABUSES OF MONEY 


invisible and unconscious ties.”- If real wealth is always 
brought into existence concurrently with credit issue, no 
rise of price will occur from the use of credit. 

But this view is hardly in accordance with the recognised 
facts. Bank credit can and does at certain times inflate and 
raise prices, i.e., its issue is not attended by a corresponding 
creation of ‘real savings’. In the upward movement of the 
trade curve, when more bank credit is needed to finance a 
larger volume of trade on a rising level of prices, it may be 
urged that the enlarged credit is accompanied by, and helps 
to produce, an enlarged volume of goods. But when the 
productive resources of the community have thus been 
brought into full employment, any further issue of credit 
must be pure inflation, the creation of buying-power where 
there is no increased wealth to buy. It is notorious that such 
over-issue of credit takes place and leads to speculative 
buying which causes prices of goods and securities to rocket. 
When the danger of this speculative price-raising becomes 
apparent, it brings a sudden shrinkage of bank credit, a 
calling in of loans which forces the sale of goods at unremun- 
erative prices, stops further production, and brings on a 
trade depression. It is no adequate reply to say that, not the 
bankers’ willingness to supply excessive credit, but the ille¬ 
gitimate demand for such credit, is to blame for these in¬ 
jurious fluctuations. It is the banker’s business to know 
what are the natural results of large issues of credit at a 
time when the economic system is already functioning fully, 
and what the effects of suddenly contracting credit must be 
when prices show signs of falling. So far as bankers know 
what they are doing, they must be deemed to act in this way 
because they think they find profits in these inflations and 
contractions of credit. In this they may be right. A 
large part of their profitable business consists in financing 
business men who are themselves engaged in financial opera¬ 
tions, in the formation of the financial structure of new 


USES AND ABUSES OF MONEY 


423 


businesses, or the financial reconstruction of existing busi¬ 
nesses, in the financial control of industrial policy, or in the 
speculative handling of stocks and shares. The banks, 
finance houses, insurance companies, stockbrokers and 
jobbers, and the private investors and speculators, who be¬ 
tween them furnish capital and credit, and stimulate or de¬ 
press productivity, constitute to-day a loose, informal, and 
sometimes chaotic government of the economic system. But 
the banks, the main credit-makers, are the central power¬ 
house in this financial government. Their wiser and more 
orderly issue of credit would be reflected in a greater regu¬ 
larity in the actual operation of the whole economic system. 

It is the perception of this truth that makes the credit 
policy bulk so big to-day in every industrial country. The 
notion that private profit-making corporations, either com¬ 
peting with one another or in combination, or, still worse, 
oscillating between these two relations, can be regarded as 
safe guardians and administrators of the public welfare in 
so vital a matter as the supply and direction of money, is an 
almost incredibly foolish survival of the providential gospel 
of The invisible hand’. There can be no ground for assum¬ 
ing that on all occasions the policy most profitable for bank¬ 
ers will also be most profitable for the public. That pecuni¬ 
ary gains can be and are made, partly by bankers, but far 
more largely by financiers with access to bank credits, out of 
disturbances and hindrances of industrial productivity, no 
analyst of modern economic movements is likely to deny. 
This, indeed, is a necessary corollary from the exposure of 
the theory of a natural harmony between private gain and 
public welfare in a business system which is not consciously 
envisaged and conducted as a rational whole. 

§ 9. That the rationalisation and moralisation of the 
economic system demands imprimis a conscious social con¬ 
trol of money is gaining ever wider recognition. This does 
not necessarily imply the complete absorption of all credit- 


424 


USES AND ABUSES OF MONEY 


making by the State. It may well be true that the detailed 
control involved in directing the local flows of credit into 
useful channels will best be left to private enterprise. But 
the larger policy of regulating the volume and direction of 
credit must certainly be a governmental function. To say 
that governments cannot be trusted to fulfil such a function 
honestly and efficiently, because of the tendency for ‘politics’ 
to get into finance, is not a reason for repudiating this duty, 
but is a reason for devising public controls from which such 
pressures may as far as possible be eliminated. When a man 
has a plain duty to fulfil, he must not plead his unfitness 
to perform it: he must hold it his duty to acquire the neces¬ 
sary fitness. So with the State. It must not acquiesce in 
the charge that it is too clumsy, mechanical, or corrupt, to 
be entrusted with the performance of a function recognised 
from earliest times as one of the prime functions of a State. 
The modern displacement of State cash by bank-made credit, 
as the main constituent of purchasing power, is a definitely 
retrograde step in social government. The regulation of 
the quantity and quality of the commodity, needed for the 
measurement of every economic value and the conduct of 
every economic process, cannot properly be left to private 
business men to be conducted as a source of personal profit. 
A good deal of the reluctance of business men and economists 
to entrust to a National Bank, or any other State authority, 
this task of credit-issue is attributable to the belief that be¬ 
cause concealment of its financial situation may be some¬ 
times advantageous to any particular business, it is there¬ 
fore advantageous to business as a whole. Here is a plain 
example of the separatist fallacy, that the good of each must 
be the good of all. In point of fact, the secrecy attending 
particular bank loans and advances encourages certain forms 
of risk-taking which, though sometimes privately profitable, 
are dangerous to the business world at large. Complete 
transparency of business operations, especially upon the 


USES AND ABUSES OF MONEY 


425 


monetary side, is not only good morals but sound business. 
The notion that concealment of vitally important monetary 
transactions can be serviceable to the public can only be 
entertained by those who believe in what we may call ‘the 
economy of illusion’. 

§ 10. Business men and politicians apparently persuade 
themselves that if, by misrepresentation, exaggeration, and 
concealment, they can evoke in the public mind an optimistic 
confidence, they can thereby cure a depression by stimulating 
activity in trade and industry. So far as confidence is a fac¬ 
tor in evoking economic energy, this policy may be deemed 
successful in a particular case. But in debasing the moral 
currency it pays a heavy price. It is not really good for the 
business world to pretend that things are better than they are. 

How prone money is to this economy of illusions appears 
from the support given by not a few economists to what one 
of them calls “The case for a gently rising price-level”. “Of 
course the stimulus of rising prices is partly founded in illu¬ 
sion. The salaried official and the trade unionist have been 
beguiled into accepting employment for a lower real reward 
than they intended. Even the business leader is the victim 
of illusion: for he is spurred on not only by real gains at the 
expense of his debenture-holders and his doctor and even 
(with a little luck) of his work-people, but also by imaginary 
gains at the expense of his fellow business men.” “But 
whether real or illusory, the spur is effective; for in economic 
as in other matters, human endeavour feeds partly on illu¬ 
sion and only partly on truth.” 1 

It ought to be unnecessary to reply that to feed people on 
illusions, i.e., on misrepresentation of the facts, cannot 
nourish them for any serviceable activity. To trick (“be¬ 
guile”) men into thinking they are getting more than they 
actually get is equally degrading to the morals and the in¬ 
telligence of the trickster and the dupe. 

1 D. H. Robertson, op. cit., p. 125. 


426 


USES AND ABUSES OF MONEY 


Security for honest money is a prime essential to any 
moralisation of the economic system. And honest money 
means that the parties using it for buying and selling must 
not be deceived by it as to the economic substance of their 
bargain, what respectively they are to gain by it. Honest 
money does not of itself ensure, or even tend to bring about, 
an equitable bargain, or serviceable distribution of wealth. 
That depends on conditions that lie outside the monetary 
process. Dishonest money, however, does alter the balance 
of each bargain, the distribution of wealth, generally for the 
worse, because it is commonly issued by, or in the interest 
of, the stronger bargainers. But its worst effect is that it 
injects a new element of ‘unreason* or ‘chance* into the busi¬ 
ness situation, and so paralyses the effective play of reason 
in economic conduct. 

§ 11. What is the net result of this argument upon the pro¬ 
posal to endeavour by considered money policy to stabilise 
the price-level? It is, I think, this. The State bank, or other 
disinterested body for the issue of credit, should seek to check 
the cyclical fluctuations of price-level by trying to stabilise 
the level reached when the actual economic resources are in 
full employment. Such stabilisation, if it can be held, would, 
I think, encourage a distribution of income favourable to 
such high consumption as would maintain indefinitely the 
full productivity. The fact that the high productivity and 
full employment were thus maintained would tend to keep 
the price-level steady, preventing that fall of prices that is 
the precursor and the efficient cause of a depression. 

But stabilisation should not be employed to stop a fall of 
price-level due to reduced costs of production from improve¬ 
ments in the technique and organisation of industry, trade, 
and transport. For a price-level stabilised under these con¬ 
ditions would distribute wealth more inequitably than if 
falling prices handed on the gain to the whole peoples in their 
capacity of consumers. 


USES AND ABUSES OF MONEY 


427 


But no merely national control of money could satisfy the 
needs of an economic system that is continually growing more 
international, or, properly speaking, more cosmopolitan in 
its processes. Recent experiments in European and other 
national tariffs, which carry the intention, and in some meas¬ 
ure the effect, of diminishing this internationalism, have by 
the difficulties and damages they have inflicted, borne signal 
testimony to the folly of seeking to limit the economy of 
cooperation by political considerations that are irrelevant. 
Financiers better than other business men are aware of this 
play, and recognise even more clearly the interdependence 
of monetary systems which in their first intent are ‘national’. 
International help in the curbing of wild monetary plunges, 
and in stabilising national currencies, have been the most 
notable economic achievements of the post-war period, con¬ 
tributing more than any other medium towards the economic 
recovery of Europe. It is now generally recognised that it 
is of great importance for everyone to know for certain how 
many marks, francs, or lire an American dollar or a British 
pound will buy, although the number of persons engaged in 
such monetary deals on any considerable scale are few. For 
the course of actual trade across political frontiers, and so 
the amount of world-wealth anyone can get in exchange for 
the goods which he helps to produce, depend upon such 
guarantees of monetary expectation. The steadying of the 
exchanges by the adoption of a common standard, whether 
gold or some other agreed international measure, is desired 
by all who are familiar with the economic havoc caused by 
plunging and disorganised exchanges. 

§ 12. If the solidarity of economic interests among man¬ 
kind were adequately realised, it would find expression in an 
international currency issued by international authority in 
accordance with the needs of the several nations as attested 
by an impartial body of experts. At first that international 
currency would probably not displace the national currencies, 


428 


USES AND ABUSES OF MONEY 


which would still operate for purposes of internal trade in 
the different countries, but would provide a reliable common 
money for foreign purchases. The difficulties of such a pro¬ 
posal are undeniable. In part, they are political, or in the 
last resort moral, the dislike which minds suffused with na¬ 
tionalism entertain for the large supernational power that 
would be wielded by this international monetary authority, 
the distrust in its integrity and efficiency. In part, they 
are practical difficulties relating to the principles that should 
govern the distribution of the international money among 
the national central banks. A federal international bank 
in which the national banks of the several countries would be 
share-holders, or some other similar form of international 
monetary cartel, would seem to be the apparatus most con¬ 
sistent with the evolution of modern institutions. It is, 
indeed, here we are confronted with one of the most critical 
experiments in federalism. At present the phase reached 
is that of occasional arrangements between the banking 
groups of different countries for the pursuance of a common 
policy in discount movements, or in loans for emergencies. 
But there is no reason why such cooperation should not de¬ 
velop into a fuller continuous and formulated policy, receiv¬ 
ing what political support is needed. 

The ethical principle involved is that which applies else¬ 
where to economic life, that of distribution of economic re¬ 
sources according to ability to use them. If the development, 
not merely of foreign trade but of internal industries in any 
country, is hampered by lack of sound currency and credit, 
the country itself being financially too weak to furnish the 
money needed, there is an obligation on the society of nations 
to assist in a process which, though often national in its first 
intent and benefit, contributes to the economic welfare of 
the world. The growth of an effective financial cooperation 
upon such lines may well be taken as the test issue of eco¬ 
nomic internationalism. How rapidly it may proceed will 


429 


USES AND ABUSES OF MONEY 

depend upon the conjuncture of many political, economic, 
and moral forces, dissolving old national enmities, promo¬ 
ting the active movements of trade, capital, and labour, across 
political barriers, educating clearer popular understanding 
of the nature and advantages of easy international coopera¬ 
tion, and weaving positive feelings of human fellowship 
among men of diverse nationalities. 

§ 13. One point remains. Money is essentially a facility 
for the voluntary interchange of goods or services: the wider 
the area of its operation, and the more reliable its action, the 
better for all concerned. It helps the efficient cooperation 
of sub-divided labour, and it links the working present with 
the working future. The establishment of a sound national 
and international machinery for the issue of currency and 
credit would have several beneficial reactions upon the eco¬ 
nomic system. By substituting public administration for 
private profiteering in the issue of credit, it would remove 
certain inflations and deflations which are injurious to trade, 
encourage speculation, and put large gains into undeserving 
hands. The steadying of price-levels, national and interna¬ 
tional, resulting from monetary control, would everywhere 
act as a stimulus to personal efficiency and industrial pro¬ 
ductivity by enabling business men more accurately to fore¬ 
cast the course of markets. Indirectly, this would contri¬ 
bute towards a more equitable distribution of wealth by 
abating the influence of superior monetary resources in mak¬ 
ing bargains and contracts. So far as it served to maintain 
full productivity and employment, it would strengthen the 
bargaining power of labour, and secure for the workers a 
larger share of the aggregate income of the community. 

If national or international governments utilised their 
revenues from taxation or public monopolies to develop nat¬ 
ural resources, or to promote other public works which, 
though beneficial in a human, or even in an economic sense, 
are not suitable for private business enterprise, the use of 


430 


USES AND ABUSES OF MONEY 


money for such purposes might greatly enhance the wealth 
and welfare of the community. But though many benefits 
might thus ensue from an enlightened monetary policy, no 
such policy could in itself effect the more substantial reforms 
in property, and the distribution of productive energy and 
income, which are required in order to establish the rule of 
reason and of justice in the economic system. If the collec¬ 
tive government of industry could be consciously realised in 
economic policies which minimised human costs of produc¬ 
tion and maximised human utilities of consumption, the 
monetary movements by which all concrete economic activi¬ 
ties are conducted and registered would operate more 
smoothly and easily by reason of a sound finance. But it 
will remain as important for economic theorists, as for prac¬ 
tical business men and wage-earners, to keep clearly in their 
minds the truth that money is ultimately nothing but an order 
on economic goods and services. For platitudinous as this 
may sound, the deceitfulness of money is still woven into 
innumerable forms of illusory thinking that ultimately turn 
on a denial of this platitude. 


CHAPTER X 

A HUMAN SURVEY 

§ 1. Our enquiry into the relations between ‘wealth’ and 
life, economic and human values, has opened up two dis¬ 
tinguishable, though not unconnected, issues of paramount 
importance. The first is that of the ethical or humanist 
appraisal of the modern economic system for the production 
and consumption of ‘wealth’, involving a consideration of 
proposals for minimising human costs and maximising hu¬ 
man utilities in the distribution of productive efforts on the 
one hand, products on the other. The second issue is that of 
the proper part of the economic activities in the art of per¬ 
sonal and social life, involving a reconsideration of the place 
and structure of economic science as a contribution towards 
an art of society. 

A brief summary of our argument and tentative conclu¬ 
sions on the former issue will run as follows. Modern in¬ 
dustry is essentially a cooperative or social process, both as 
regards the production of concrete wealth and the determina¬ 
tion of its value. Strictly speaking, nobody can make any¬ 
thing for his own use, or for the market, without the prior 
or the current assistance of others. Even the solitary pio¬ 
neer uses tools and skills which embody the activities, ex¬ 
perience, and knowledge of countless predecessors. He 
could ‘make’ nothing without this social heritage. But when 
we enter an economic system in which men are making goods 
for a market, the cooperative nature of the work and its 
product is far more elaborate, involving not only this social 
heritage, but the current cooperation of innumerable workers 


431 


432 


A HUMAN SURVEY 


in other processes that precede, accompany, and follow, the 
particular process in which each man makes his personal 
contribution towards some marketable product. At each 
stage in the series of processes, by which raw materials drawn 
from ‘nature’ are converted into salable articles, we en¬ 
counter tributary processes furnishing the tools, machines, 
power, and additional materials required for the worker in 
that process to ply his skill. Take any final product, a 
pair of shoes, a loaf of bread, a house, the number of persons, 
and the variety of activities that have contributed to its 
making, are beyond all possible computation. Nor is it 
merely a number of separate individual contributions. Most 
modern businesses are in themselves complex social organi¬ 
sations, in the sense that their products cannot be regarded 
as the mere aggregate of separate individual contributions: 
the cooperation is itself a productive power. The most 
elaborate costing cannot really solve the problem of measur¬ 
ing the separate contributions of the workers towards the 
total ‘cost of production’, for each worker is helped in doing 
his particular job by other workers in the same or prior 
processes, and the size, pace, and quality of his contribution 
are dependent on this help. In every business there are also 
to be found activities, managerial, supervisory, clerical, etc., 
rightly classed as productive, which in their nature evade 
measurement. 

But if the business is a social organisation, so is the trade 
and its market. The directly conscious cooperation of the 
members of a trade for the pursuance of a common policy, 
the pooling of trade information, restriction or regulation 
of competition, price-arrangements, collective bargaining 
with labour, cooperative marketing, etc., is not the most im¬ 
portant aspect of this social organisation. It is the structure 
and activity of the market that brings out most fully the 
social nature of industry and its product. For in the inter¬ 
play of supply and demand in each market, a particular 


A HUMAN SURVEY 


433 


product, itself, as we have seen, socially created, is brought 
into directly inter-active relations with all other productive 
activities throughout the entire economic system. For the 
play of ‘demand’ in the determination of the price, or ex¬ 
change value, of the supply of any particular article, implies 
nothing less than this. The price which the pair of shoes, 
the loaf, the house, will fetch in a market, signifies the quan¬ 
tity of all sorts of real wealth available for distribution 
among the various persons who have ‘made’ the shoes, loaves, 
houses. Now this generalised wealth is what all the makers 
of the specialised wealth are after. The tanner, or the shoe¬ 
maker, does not make shoes for his own use, but in order to 
get access to all sorts of goods by getting a price for his shoes. 
So with every specialised producer. How much he can get 
of each other various sort of goods which he requires, quite 
evidently depends upon the processes of cooperative produc¬ 
tion in innumerable businesses and trades of which he has 
no knowledge and no control. That is to say, the end or 
object of his specialised activity is an end or object deter¬ 
mined in size and character by the intricate interaction and 
cooperation of all persons entering the market for his goods 
on the demand side, with articles which they are seeking to 
exchange against his shoes, or loaves, or houses. 

This determination of the real reward in wealth coming to 
each particular producer is none the less to be described as 
‘social’ because there is no fully conscious central social 
policy controlling it. There does exist, as we see, some degree 
of conscious social organisation within the several businesses, 
and even trades, for production, and to a limited extent for 
distribution, within a business or a trade, of the body of 
wealth obtained by selling in a market the special product. 
Moreover, organised finance furnishes some conscious control 
and direction over the allocation of new productive resources 
to the various localities and industries, though its direct 
control is as yet of comparatively restricted dimensions. 


434 


A HUMAN SURVEY 


The growth and increasing reliability of information regard¬ 
ing present and prospective markets moves ever larger 
quantities of productive resources to apply themselves to 
the most profitable enterprises open to them, though inertia, 
lack of knowledge, low intelligence, local attachments, na¬ 
tional, local, or trade barriers, and other impediments, pre¬ 
vent any adequate conscious world-economy, even on the 
lines of competitive profiteering, from establishing itself. 

§ 2. The importance of a clear realisation of the actual 
social determination of values, through the processes of mar¬ 
keting, lies in the light it throws upon the economic wastes 
and the inequality of the distribution of human costs and 
utility or enjoyment. But how far is this principle appli¬ 
cable to human nature as expressed in economic activities? 
to each according to his needs’ as an accepted principle of 
ethical perfection. If wealth is really, as we have shown, 
a social product, organised society, so far as it can, ought to 
see that it is produced and consumed in accordance with this 
principle of minimum human cost and maximum human 
utility or enjoyment. But how far is this principle applic¬ 
able to human nature as expressed in economic activities? 
Taking the economic system and its product as they stand 
to-day, can the working of that system and the production 
of that product be made to square with the application of 
our principle? If every sort of ‘producer’ were paid in ac¬ 
cordance with his ‘needs’ (or more properly, his ability to 
put wealth to a good use), would the available productive 
resources be economically applied? Or are there important 
classes, owning some factor of production, who would refuse 
the full productive use of it unless they were paid a price in 
excess of their ‘needs’? 

Recognising that the principle has a certain basis of bio¬ 
logical necessity, in so far that a natural relation exists be¬ 
tween output of energy and its replacement in food, rest, etc., 
we find this natural relation extended into wages of sub- 


A HUMAN SURVEY 


435 


sistence, or of efficiency, for various sorts of labour. In the 
higher grades of labour it is a matter not merely of replace¬ 
ment of physical energy, but also of stimulating and main¬ 
taining the will to work. Intelligent and self-respecting 
workers cannot be got to put the requisite energy and skill 
into hard dull work, without some compensation in wage and 
leisure that exceeds the narrow interpretation of physical 
replacement. Shall we call the higher payment they re¬ 
quire a contribution towards the principle of payment ac¬ 
cording to needs? At first sight ‘need’ seems to be used in 
a somewhat different sense from that conveyed in our 
formula. For there it signified capacity for useful consump¬ 
tion, whereas here it seems to imply a reluctance to be over¬ 
come, a necessary stimulus to work. Some work is in itself 
so repellent that nobody would undertake it, given free choice, 
except at a rate of pay which carries no implication that a 
good use will be made of it. Reflection, however, will, I 
think, endorse the view that where a physical capacity to 
work is impeded by a want of will to work derived directly 
from the nature of the work, or the conditions under which it 
is done, the extra payment required to liberate the labour- 
power must be brought under the economy of payment ac¬ 
cording to needs. The good use of this payment is that it 
energises the will to work. If, as may sometimes be the case, 
the extra payment is employed in waste or even injurious con¬ 
sumption, this consideration will rank as a deduction from the 
economy of needs, and may even cancel it in cases where the 
product evoked by the stimulus is not a necessity of life or a 
high utility to its consumers. 

There are other cases of productive activity which at first 
sight seem more recalcitrant to our equitable formula. 
Possessors of rare skill, knowledge, initiative, judgment, or¬ 
ganising power, may insist upon receiving as ‘rent of utility’ 
or ‘profits’ the full scarcity value which their natural or ac¬ 
quired ability can get in the market, an income which may 


436 


A HUMAN SURVEY 


be far beyond their needs or capacity to put to any beneficial 
use. This is, however, not an extension of our earlier case. 
For, as we have seen, these high class or personal rents and 
profits are not necessary stimuli to the performance of pro¬ 
ductive service, in the sense in which the higher wages for 
repellent labour were. They are rightly classed as ‘rents’, 
by analogy with payments made to owners of serviceable 
land, in as much as they are ‘surpluses’ over and above the 
payments needed to evoke the productive effort of their 
owner. They are taken because they can be got, not because 
they need be got. They are not necessary to sustain the pro¬ 
ductive energy of their recipients, or to supply them with the 
income needed for a good life. 

§ 3. But while our primary distinction between costs and 
surpluses and the association of the latter term with social 
waste and injustice, lead us to envisage a sound economic 
society as one in which all surpluses are absorbed in public 
income, or in the fulfilment of the personal needs economy, 
we have recognised that there are limits to any early general 
application of this principle. For this purpose surpluses fall 
into two categories. Economists have always realised that 
scarcity and differential rents of land and other internal 
resources fulfill no useful economic function, and can be taken 
by taxation without impairing the use of these resources. 
Nor can their absorption in public revenue be regarded as im¬ 
pugning the principle of distribution according to needs in 
the case of owners living on these rents. For to endow per¬ 
sons with a power of living without performing any useful 
function is to inflict a double injury, first to their personality, 
and secondly to the society from whom they withhold the 
personal services they might have performed, if they had 
to work for their living. The pace at which these injuries 
can be remedied must no doubt be qualified by consideration 
for established law, usage, and expectations. A wholesale 
withdrawal of rents and other surpluses would inflict unde- 


A HUMAN SURVEY 


437 


served injuries upon classes unable suddenly to adjust them¬ 
selves to the requirements of a new social-economic order. 
But equity and economy alike demand that land and other 
natural values should not remain private income for future 
owners. 

Certain large elements of profits and dividends evidently 
fall into the same category. This is the case of the excessive 
gains of manufacturing, trading, and other business mono¬ 
polies, or artificially contrived combinations. Though usu¬ 
ally less stable and permanent than natural rents, regarded 
as payments for the use of capital and business enterprise 
they are equally obnoxious to our equitable formula, and 
are, in theory at any rate, equally susceptible to confiscation. 
For, though it is arguable that the displacement of wasteful 
competition by orderly combination may be a sound eco¬ 
nomic policy, it can only be a sound social policy, if society 
is adequately safeguarded against the extortions which often, 
if not usually, accompany the possession of a power to regu¬ 
late production and fix prices. The distribution of excessive 
gains made from such sources violates the needs of economy. 

Nor is there any force in the defence of such high profits 
on the ground that big prizes are necessary incentives to 
evoke certain orders of high business capacity. For the 
gains of monopolies and artificial scarcities do not evoke 
productive efforts. Rather they restrain and limit them. 
These super-profits are strictly speaking as functionless as 
rents in the operation of the economic system. Like rents 
they are taken because they can be got, not because they are 
necessary to the energetic working of the system. Moreover, 
even if lax usage regards such monopoly gains as ‘prizes’, there 
is no economy exercised in the use of such incentives. When 
it is recognised that the exercise of power is a much stronger 
motive with most able business men than money-making, 
it will appear that the wastefulness of these huge unmeasured 
prizes is thoroughly unsound social economy. 


438 


A HUMAN SURVEY 


The case of large incomes of business men, made by su¬ 
perior skill, industry, organisation, and enterprise within 
the competitive system, falls under a different category. In¬ 
dustrial progress demands the services of men prepared to 
stake their material and mental resources in new lines of 
business, the adoption of new plant and processes, the open¬ 
ing up of new markets, experimental conduct essentially 
hazardous. This type of work we recognise as being of the 
highest social value. But in the complex of motives and 
interests that induces these men to do their work the prospect 
of large gains usually bulks big. They are usually pushful, 
confident, self-assertive men, determined to use their talents 
for their own advantage, and that advantage is envisaged 
most clearly in terms of money power. While this hard 
gain-seeking element may be capable of modification under 
a system which was more educative of the sense of public 
service, it is right to recognise that this acquisitiveness is a 
very obstinate and potent stimulus to the exercise of these 
exceedingly valuable services. This being so, it will remain 
a sound social economy to offer considerable prizes to evoke 
their use, although the incomes which they represent in¬ 
juriously compromise the principle of distribution 1 accord¬ 
ing to needs’. For these gains differ essentially from those 
rents and monopoly profits which we have been considering, 
in that, given human nature as it is, they are conditions of 
industrial advances in which the public shares. For though 
the inventor of a new technique, or other economy of pro¬ 
duction or of marketing, may be out for his own hand, regard¬ 
less of the public good, his own advantage is bound up with 
the rendering of a public service. He cannot keep to himself 
all the gain of his activity. At the same time it is well to 
recognise that the distribution of the gain due to his pro¬ 
ductive work as between himself and the public is not based 
on any rational or equitable principle. The serviceable 
brain of a Mr. Henry Ford or a Mr. Rockefeller would, as we 


A HUMAN SURVEY 


439 


suggest, probably operate just as effectively for ten or five 
per cent of the actual gains which the market enables him to 
take. There is simply no correlation between services ren¬ 
dered and rate of pay in such brain markets. The same 
reasoning applies to the high fees and emoluments paid to 
professional men of high repute in countries where wealthy 
men abound and professional reputations are raised to scar¬ 
city values. To ration such men on a ‘needs’ basis, however 
liberally interpreted, would be an unsound policy, until a 
far higher sense of social service prevails among the profes¬ 
sional classes. But a good deal of such excess as may thus 
seem warranted, as inducements to high business and pro¬ 
fessional talent, may be corrected by a skillful exercise of the 
taxing powers, adjusted so as to reduce the net gains to their 
strictly economic limits. So far as the savings of the in¬ 
vestor are required to finance experiments in industrial and 
commercial progress, this modified policy of prizes extends 
also to them. So far as it calls forth in the investing public 
a genuinely speculative spirit with some skilled judgment 
behind it, as distinct from a gambling spirit, it is economi¬ 
cally justified, though here too a judicious system of taxation 
of incomes and inheritances may go far to restore the balance 
of distributive equity. 

§ 4. Our survey thus discloses considerable obstructions 
to the displacement of an acquisitive society by a purely 
functional, the substitution of payment according to capacity 
for use, for payment according to economic pulls. A good 
deal of income, it would appear, must still be assigned in 
excess of consumptive ‘needs’. The recalcitrance to the 
equitable principle is found both at the bottom and the top 
of the economic system. Workers in sheltered trades per¬ 
forming essentially disagreeable and onerous work, which 
has a high social utility, will, so far as free access to employ¬ 
ments is available, tend to get rates of pay which have no 
relation to their ‘needs’ or capacity to put to a good use, rates 


440 


A HUMAN SURVEY 


often obtained at the expense of other workers whose true 
‘needs’ thus remain unsatisfied. This is a specific disturb¬ 
ance of the balance of distribution of wage-income. The 
other disturbance in the higher reaches of income is due to 
the insistence of certain owners of ability upon claiming for 
themselves a larger share of the gains, which their ability 
helps to produce, than they are able to put to a good use. 

But while it is thus open to argue that the persistent and 
intense will to self-assertion in some useful types of men will 
always lead them to insist upon exploiting their personal 
gain the strategic advantage of their position in the economic 
system, there are important countervailing considerations. 
Our enquiry into the ethics of consumption leads us to a rea¬ 
sonable hope that a more refined and individual art of con¬ 
sumption, supervening upon a full secure provision for the 
primary needs of life, will, partly from reasons of humanity, 
partly from finer tastes, cancel or greatly diminish the de¬ 
mand for goods and services which involve dull, heavy, and 
degrading toil from fellow-men. This reaction issuing from 
the consumer, coupled with a deepening of social concern for 
humane conditions of labour among employers and the gen¬ 
eral public, should eliminate many, if not most, of these in¬ 
human costs, with their disturbances of the equitable dis¬ 
tribution of wage-income. Machinery is capable of taking 
over most productive operations that are definitely dull, 
heavy, and repetitive, while such toil as cannot be thus taken 
over, owing to essential irregularities of material or process, 
can be alleviated greatly by shorter hours, or alternative 
occupations. Though it would be purely fanciful to suppose 
that the street-mender or the dustman can find much con¬ 
scious comfort in the evident social utility of his task, short 
hours, security of employment and of pay adequate to his 
customary standard of living, may considerably affect his at¬ 
titude towards his job. 

As for the higher levels of disturbance, there are already 


A HUMAN SURVEY 


441 


signs of an abatement in the purely profiteering frenzy of 
the competitive capitalism that is passing away from large 
spheres of modern business. The organisation, management, 
and finance of great capitalist enterprises are seen to be 
passing more and more into the hands of men no longer 
mainly actuated, as were the pioneer business men of the 
last generation, by the craving for large, rapid monetary 
gains, but of men who regard their great complex instrument 
partly as a sphere for their display of managerial capacity, 
partly as a service for the satisfaction of a public need. The 
weakening control of the investor, and the increasing tend¬ 
ency towards debenture capital and other fixed interest, 
nourish this new psychology in the managerial mind. 

§ 5. The suggestion, however, that these important busi¬ 
nesses are in effect socialising themselves, by a process of 
ethical conversion of the directorate or management which 
guarantees an equitable and human consideration of all the 
interests involved, capitalists, staff, wage-workers, consum¬ 
ers, cannot, indeed, be accepted without question and quali¬ 
fication. While it may be true that the relative stability 
and security of many of these great concerns evokes some 
sense of social service in their controllers, and gives scope and 
interest to the arts of technical and business achievement, as 
distinct from the satisfaction of the gain-seeking instinct, 
there remains a sentimental factor in this alleged solution 
of one of our greatest economic problems that can hardly 
bear close inspection. It has a too close resemblance to the 
benevolent autocracy adduced so often to cut the Gordian 
knot in politics. Ruskin’s famous appeal to the Landlords 
and Captains of Industry to assume and exercise the social 
obligations of their status, quite ineffectual in mid-Victorian 
England, can hardly be relied upon to-day in substitution for 
all direct measures of social self-government. 

It is impossible to envisage a safe and satisfactory eco¬ 
nomic system emerging from a number of separate inde- 


442 


A HUMAN SURVEY 


pendent economic concerns, each in sole control of some 
important function of the system. Such a scheme contains 
no accepted principles for equitable wage-fixing or price¬ 
fixing. Every weakening of the motives to utilise the price¬ 
fixing power in the interests of the capitalists would be ac¬ 
companied by a disposition to deal liberally with the staff 
and the workers, for their claims and interests would have 
a nearer and more personal appeal than the diffuse interests 
of the large unknown body of consumers. Thus, as we have 
recognised, the existing conflict between capital and labour 
would be likely to be replaced by a conflict between trades 
or concerns with strong price-fixing powers and those with 
weak, between necessary-producing and luxury-producing, 
sheltered and exposed, industrial and agricultural trades. 
No voluntary sense of public service in the management 
could be relied upon to do adequate justice in a problem of 
distribution where no social law could be invoked. 

§ 6. This line of reflection has led us to recognise the 
necessity of some definite scheme for economic government, 
representing the diverse interests involved, and competent 
in its form and its perspective to evaluate economic processes 
and products jn terms of human costs and utilities, and to 
direct the use of economic resources by considerations of 
permanent welfare. The first steps in the concrete policy of 
such an economic government would be directed towards the 
elimination or reduction of certain processes detrimental to 
human physique, intelligence, or morals, and to a distribution 
of the product based upon considerations of maximum enjoy¬ 
ment. Experiments directed to distinguish those payments 
which are economically necessary, in order to elicit and 
sustain the most efficient application of economic resources, 
from those which are functionless surpluses, will be of pri¬ 
mary importance in directing economic policy. For the 
socialisation of these surpluses by economic society, in order 
to apply them, partly, to communal service, partly, to a 


A HUMAN SURVEY 


443 


raising of the general standard of personal living, will be a 
chief instrument not only of economic but of moral reform. 
For, as we have seen, the forcible seizure of such surpluses 
by strong or lucky economic individuals and groups, fortified 
by legal rights of property, has become in an increasing 
measure the source of conflict, waste, and moral disintegra¬ 
tion, in modern society. Analysis of economic processes 
discloses these surpluses as essentially social in their origin, 
and, therefore, properly to be administered as social income! 
For constituting, as they do, the economic subsistence fund 
for a human policy of progress, they cannot safely or advan¬ 
tageously be left to be spent or saved in accordance with the 
current short-range wants and interests of individuals. The 
establishment of an absolute equality of economic oppor¬ 
tunity which should dissipate these surpluses in raising the 
personal income of all members of the community, would, 
therefore, not suffice. This ‘distributive state’, as it is some¬ 
times called, would give no security for the best human use 
of economic resources. A policy designed to use economic 
resources for the enrichment of human life must be a socially 
conceived and administered policy, just because, alike in 
origin and in utilisation, these resources and the activities 
that employ them are social, and society is something more 
and other than an aggregate of individuals cooperating for 
purely individual ends. How far the political state, as we 
have hitherto known it, is a competent instrument for the 
performance of this difficult and delicate new work of eco¬ 
nomic government, is sure to be a debatable issue. For, 
though the State, as guardian of the general interests of its 
members, and for purposes of revenue, must exercise certain 
controls over the economic system, and may be needed as 
an ultimate arbiter in issues involving public order and sup¬ 
ply, it is in its present structure and mentality manifestly 
unfit for most purposes of economic government, alike in 
those processes which are definitely described as ‘public con- 


444 


A HUMAN SURVEY 


cerns’, and in those where some general economic control 
alone is needed. 

§ 7. Such progress in the conscious art of equitable eco¬ 
nomic government must, as our organic treatment indicates, 
have exceedingly important reactions upon the wider art 
of civilisation. To most modern thinkers the excessive strain 
and burden of industrialism and its related economic pro¬ 
cesses have seemed the chief obstacle to a desirable life. 
It is not that economic processes in recent times have been 
absorbing more of the time and energies of men. In the 
Western world, and especially in the countries most ad¬ 
vanced in modern industrialism, the contrary is true. There 
has been, for the- great body of these peoples, some allevia¬ 
tion of the economic burden, some considerable enlargement 
of other human activities, interests, and enjoyments. Even 
of the more backward peoples, whose feet are more newly 
set upon the ladder of industrialism, it can hardly be said 
that economic activities absorb a larger portion of their lives 
than heretofore. This, at any rate, is only true of a com¬ 
paratively small proportion of the backward peoples of the 
tropics where nature is abundant in her food supply and 
population has not pressed on this abundance. For, though 
the spread of industrialism and machine-production has 
imposed regular work for long hours in factories or planta¬ 
tions upon peoples, accustomed formerly to short, irregular 
bouts of strenuous activity in hunting, building, or other pro¬ 
cesses, the general truth holds good that most primitive men 
devote their energies mainly to their necessary physical 
maintenance, and that progress in the industrial arts pro¬ 
cures for them some liberation from this pressure. While 
systems of slavery, serfdom, or wage-labour may for a time 
absorb the fruits of industrialism in the leisure and the larger 
life of a master-class, the trend of modern history shows us an 
ever larger proportion of the peoples of industrialised coun¬ 
tries sharing in some degree the liberative results of indus- 


A HUMAN SURVEY 


445 


trialism. All the movements towards the humanisation of 
the economic system, which we have examined, may be re¬ 
garded in the light of demands for a further and faster libera¬ 
tion of humanity from the thraldom of economic forces. At 
first sight the core of economic discontent and of the claims of 
labour may appear to take shape in a demand for a larger 
share of the economic product. And for the most depressed 
classes this is the first step towards a higher status in civilisa¬ 
tion, viz., higher wages and more security of livelihood. But 
for all classes or peoples that have attained these elements of 
economic safety, the demand for more leisure and for a 
gathering number of non-economic interests, activities, and 
satisfactions, a filling out of human life becomes the para¬ 
mount urge. 

This is a far stronger and more prevalent urge, though not 
fully conscious or clearly formulated, than the accompanying 
demand for a voice in the control of economic operations. 
Indeed, it may be said that the latter demand is essentially 
contributory to the former liberative process. The workers 
want industry and employment put on such a footing that 
they will not need to work so hard, or to worry so much, 
about the elements of economic life. In the highly stan¬ 
dardised routine processes which must continue to play a 
considerable part in industry, expert direction and manage¬ 
ment will afford little scope, need, or desire, for active par¬ 
ticipation on the part of the rank and file of employees, 
except in occasional incidents of a personal bearing. What¬ 
ever progress is made towards industrial democracy along 
the lines of representative government, it will not be neces¬ 
sary, possible, or desirable, that these routine workers should 
give much personal attention to, or take much active interest 
in, the job which is their particular contribution towards the 
economic upkeep of society. Though better education may 
give some appreciation of the complex of productive processes 
in which their work enters as an integral factor, the general 


446 


A HUMAN SURVEY 


tendency will be towards so smoothly automatic an operation 
of such processes as to evoke little conscious interest in the 
participants. Security, equity, and standardisation carry 
this condition of thought-saving. Routine workers will 
necessarily look for the active interests of life outside the 
definitely economic sphere. Economic progress for them 
will spell safe livelihood, spare energy to utilise a larger 
leisure, and social provisions for the cultivation and enjoy¬ 
ment of all the tastes and activities that were starved under 
the old order. 

But though a limited amount of this specialised and essenti¬ 
ally uninteresting work may be regarded as a tolerable and 
a reasonable contribution from the members of society to¬ 
wards its economic upkeep, and not as a real sacrifice of per¬ 
sonality, progressive welfare must evidently require that 
such work shall not predominate within the economic system. 
Social progress clearly demands that, as far as possible, hu¬ 
man labour shall be displaced by machinery and non-human 
power in the supply of goods for the common physical needs 
of life, and that an ever increasing proportion of such ener¬ 
gies as men give to economic processes shall carry elements of 
personal skill, interest, and achievement. While what be¬ 
longs to common humanity must be furnished, and ever more 
abundantly, by standardised routine, in which men tend or 
superintend machines, the uniqueness of personality, even 
within the sphere of economic needs, must require that a 
growing proportion of productive work shall come within 
the realm of art, the moulding of materials into forms that 
fit the needs or tastes of an individual. Such work is not fine 
art, which has in it an element of universal appeal, but it 
demands conscious exercise of skill in its performance and 
the sense of completeness that distinguishes the work of 
craftsman from that of factory hand. 

§ 8. But while social progress thus humanises economic 
life, by reducing the human costs of routine work and reduc- 


A HUMAN SURVEY 


447 


ing the proportion which routine work itself shall bear in eco¬ 
nomic life, its supreme test lies in diminishing the part which 
economic interests and activities as a whole shall take in the 
life of man in civilised society. Where a person is engaged 
in producing goods or services for a market, the pressing in¬ 
terest of pay or personal gain necessarily interferes with 
the realisation of the utility of the work as a social function. 
In a really civilised society the whole complex of economic 
activities should occupy a dwindling part in the life drama. 
“Getting and spending, we lay waste our powers.” The econ¬ 
omy of life demands the reduction of economic processes 
which derive their significance from the ‘niggardliness of na¬ 
ture’, including human nature. A free life requires the lib¬ 
eration of the greater part of human energy for love and 
friendship, knowledge and thought, joy and beauty, things 
that are not marketed and are not ‘consumed’. 

§ 9. Those who confront this wide conception of deliver¬ 
ance from economic bondage not unnaturally look first and 
foremost to science as deliverer. During the past century 
the sense of man’s mastery over nature, by the knowledge 
of her laws, has bred a new confidence in man. The physical 
sciences applied to the arts of industry could increase pro¬ 
ductivity beyond the dreams of avarice. Such was the early 
vision, clouded later by a growing sense of the refractory 
character of that part of nature termed human. The con¬ 
flict between the early capitalist conception of a ‘robot’ 
system and the more human conception is not yet concluded, 
but in the more advanced industrial countries it turns in 
favour of the latter. Every year the recognition of the fact, 
that an effective exploitation of the forces and materials of 
nature for economic productivity is conditioned by willing 
and well-ordered cooperation among the ‘human factors’, 
obtains wider assent among business men. The problem of 
productivity is thus put upon a wider and a sounder basis. 

Technically considered, the powers of wealth-production 


448 


A HUMAN SURVEY 


which the advanced arts of industry place at man’s disposal 
now and in the early future enormously transcend the actual 
output. Movements towards the full utilisation of these 
powers are persistently held up by two defects in human or¬ 
ganisation. One is the wasteful conflict of interests between 
employer and employed in the several businesses and trades, 
between the stronger and the weaker trades in each country, 
and between nations or countries ranged as rival economic 
systems. These several sorts of conflict are serious obstacles 
to the organisation of the economic resources of the world 
for the maximation of productivity. If the material re¬ 
sources of the world were freely and equally accessible to all 
people possessing the knowledge, skill, and enterprise to 
exploit them, and the foods, materials, and commodities thus 
attainable were free of all markets, if workers and capitalists 
saw their common interests served by vigorous and willing 
cooperation in the various processes of production and trans¬ 
port, and statesmen ceased to confuse politics with economics, 
the human powers of production would be capable of a rate 
of wealth-creation vastly exceeding that actually attained, 
even in the most productive society that history has yet 
disclosed, the United States within the past decade. 

But that capacity for high productivity would not be 
realised in actual production, unless the other defect of our 
economic system, the lack of correlation between producer 
and consumer, between the maximum rate of production and 
the maximum rate of consumption, were rectified. In other 
words, the just significance of The economy of high wages’ is 
essential to the realisation of full productivity. For unless 
the distribution of the product, through the apportionment of 
money incomes, is such as to stimulate consumption to keep 
pace with every increase in rate of production, the powers 
of productivity must continually be checked or brought to 
a standstill by insufficiency of markets. 

Better or more equal distribution thus ranks as an indis- 


A HUMAN SURVEY 


449 


pensable condition of high productivity. Security of liveli¬ 
hood for all, with rising intelligence and confidence in man’s 
control over nature, would evoke a dynamic economy of con¬ 
sumption that would not merely furnish full employment to 
all existing powers of production, but bring about improve¬ 
ments in technique and organisation at an accelerating pace. 
Competition for markets, with its wasteful over-development 
of advertising and selling agencies, would be replaced by a 
constant strain of consumers’ demand upon the productive 
resources of the economic world. 

But this enlarged productivity under the pressure of a rise 
in the general standard of consumption need not, and should 
not, imply any net growth in the human costs of production, 
or any enlargement of the place of industry in life. For 
after security of livelihood, with full satisfaction of the com¬ 
mon requisites of civilised existence has been won for all, 
consumption more and more assumes the character of an 
art. It becomes more qualitative and individual. Improved 
standards of material consumption will signify not more but 
better foods, clothes, furniture, etc., thus operating as a de¬ 
mand for better qualities of workmanship, and grafting final 
processes of individual skill upon the earlier routine or me¬ 
chanical processes in the history of commodities. Still more 
important in this qualitative art of consumption will be the 
increased proportion of expenditure upon non-material goods 
and services, including in the category ‘non-material’ such 
things as books, pictures, and other art products, the mate¬ 
rial part of which forms an insignificant part of their yield. 
The double gain from a qualitative improvement of con¬ 
sumption, enabling the finer and more creative activities of 
producers to function in the supply of forms of wealth, the 
more durable of which are literally infinite in the utilities they 
contain, is a testimony to the illimitable possibility of the 
progress of man under a truly equitable and intelligently or¬ 
dered economic system. 


450 


A HUMAN SURVEY 


§ 10. There remains, however, one difficult but indispens¬ 
able condition to the realisation of this vision of increasing 
human wealth with reducing costs of production, namely a 
regulation of the quantity and quality of population. Our 
discussion of this subject showed, as might have been ex¬ 
pected, that it is less amenable to reasonable modes of settle¬ 
ment, either theoretical or practical, than any of the other 
subjects that have come under our survey. The substitution 
of the conception of an optimum density for the vague physi¬ 
cal subsistence limit of the earlier Malthusianism, though 
serviceable as a starting point, does not lead us to a goal. 
Its only definite meaning envisages the right population for 
a country, or for the world, as determined by the highest 
output of other economic goods per unit of the population 
after a sufficiency of food and other prime material requisites 
of life have been provided. But such a definition is seen to 
be defective in several respects for our purpose. In the first 
place, it applies an exclusively economic valuation to a case 
where other non-economic values are involved. Those who 
form a high estimate of the worth of life, as such, its surplus 
of happiness or satisfaction, will favour a higher optimum 
density for a given country than those who value low, what 
they would call mere animal existence, setting store only 
on the higher human satisfactions. Again, by taking as 
its criterion quantity of general wealth, it ignores the bearing 
of those qualitative considerations of production and con¬ 
sumption mentioned above. A thoroughly standardised 
community may have a higher optimum density than a more 
individualised people, though most thoughtful persons would 
prefer a smaller but finer number of personal beings to a 
larger herd. Since the maximum total output per man will 
depend upon the proportionate utilisation of industrial pro¬ 
cesses that conform most fully to the economy of large-scale 
standardised production, it is evident that a serious question 
is prejudged by the adoption of the maximum output test. 


A HUMAN SURVEY 


451 


Again, the optimum density test, however suitable for 
current economic valuation, will not satisfy the demands 
of a full human valuation. For its assessment of economic 
wealth is based on the actually desired, not on the humanly 
desirable. Those who hold that the true values, either of 
economic or of other activities, consist in certain high re¬ 
finements of intellectual and moral culture, may prefer a 
society where the leisure of all, or even of a favoured class, 
shall furnish opportunities for these higher qualities of life. 

But such considerations indicate how impossible it is to 
discuss the quantitative question of an optimum density 
apart from the qualitative. Whether the optimum density 
of a given country would be higher for a population of crude 
materialists than for a population of cultured supermen, may 
be a disputable question, but it would certainly be a different 
density. In a word, the optimum density will depend for 
one of its conditions upon the character of the population. 

That certain strains or stocks in a population are better 
than others in physique, intelligence, or ‘character’, and that, 
after due allowance is made for defective knowledge as to the 
effect of crossings, it would be socially desirable to encourage 
the propagation of such stocks, and to discourage the propa¬ 
gation of stocks worse in these respects, is indisputable. 
There would be substantial agreement upon certain definitely 
sound and other definitely unsound types of parentage, 
though wide fields of controversy would remain. Though 
the laws of human heredity are still so inchoate, and the 
relative importance of heredity and environment so sharply 
contested, few would deny that there is reasonable ground 
for holding that certain desirable and undesirable characters 
are transmissable, and that if one of the two parents possesses 
them, they will probably be transmitted to all or some of 
the offspring. 

§ 11. The economic problem, as we recognise, finds its 
widest application and its most crucial issue in racial valua- 


452 


A HUMAN SURVEY 


tion. Here also the problem is complicated by disputes as 
to the extent and importance of admitted racial differences, 
and as to the permanency of racial characters in a new phy¬ 
sical and social environment. Here, moreover, we are en¬ 
countered in a more intense degree with the difficulties 
arising from the lack of an accepted standard of human 
values. To the attempts to bounce, or bluff, a hierarchy of 
racial values under a semi-mystic Nordic supremacy, no 
intellectual or moral validity can be attached. But because 
no thoroughly disinterested or objective criterion of racial 
values is attainable, we are not justified in dismissing the 
problem as insoluble. Indeed, it cannot remain a matter of 
indifference to those concerned for the civilisation of the 
future, in what proportions the various known races inhabit 
the earth. The stabilisation, or even the reduction, of the 
white populations which have advanced furthest in Western 
civilisation, is apparently attended by a rapid increase in 
certain backward peoples of Asia and Africa. If this move¬ 
ment continues, these backward peoples must bulk ever 
bigger in the aggregate of humanity. If, however, they 
prove capable of taking on at a fairly rapid pace those arts 
of industry and of consumption in which Western civilisation 
has made its chief advances, they must also come to exercise 
populational control, halting at some optimum density. In 
that event, humanity may seem secure for an orderly control 
of progress. 

But how if some of these races remain backward in every¬ 
thing save the growth of low standard populations pressing 
on the means of subsistence? Here, as we recognise, the 
gravest of all human problems of the perhaps not distant 
future emerges. If international organisation for political, 
economic, and humanitarian causes gains a stronger footing, 
its thinkers and administrators must more and more be 
compelled to confront concrete issues raised by these popu¬ 
lational pressures, with their increasing demands upon the 


A HUMAN SURVEY 


453 


surface and resources of the earth. If, as we have argued, 
rationing according to capacity for use is the essence of 
economic government, such international organisation as 
can assume the requisite powers, will be bound to direct its 
rationing process to population itself. What the more 
sparsely peopled white countries are already doing for them¬ 
selves, the world-community must eventually learn to do for 
itself. To those who recognise that this rationing involves 
supersession of the most highly valued of the self-determin¬ 
ing functions of nations, this international rationing of flows 
of population will seem utterly impractical. And so it will 
essentially remain, until and unless the sentiment of hu¬ 
manity comes to transcend the sentiment of nationality, and 
a patriotism emerges which will be ashamed to shirk its 
proper share in the solution of the root problem of human 
welfare. 

Here then are the firmly interlocked conditions of a civi¬ 
lized humanity in which the distinctively economic activities 
will occupy a dwindling part, leaving an increasing volume of 
human energy for the free creative activities of persons and 
communities. 

(1) Increasing productivity by improved control over nature 
and better human organisation of economic activities. 

(2) An equitable and wasteless distribution of the product of 
economic activities. 

(3) Improving arts and standards of consumption with their 
reactions upon the productive processes. 

(4) Such control over the quantity and quality of populations as 
is attainable with better knowledge of strains and racial values, 
and an increased willingness to accept controls. 

So far as these conditions are attainable, they furnish the 
economic framework for a conception of the progressive wel¬ 
fare of humanity. The first three conditions will easily be 
accepted as falling within the legitimate scope of Economics, 
though that science has paid little attention to the arts and 


454 


A HUMAN SURVEY 


standards of consumption. The population question, the 
subject of our fourth condition, though admittedly trans¬ 
cending Economics in its wider biological and sociological 
applications, has from the time of Malthus always occupied 
a place of some importance in economic treatises, though 
almost always in its quantitative influence upon wealth- 
production through the law of diminishing returns. Al¬ 
though within recent years this importance has greatly 
risen, it remains a distinctively quantitative issue, as the new 
theory of Optimum Density serves to indicate. For, though 
it may be claimed that the optimum conception has express 
regard to a high standard of living, that height itself is con¬ 
ceived wholly in terms of quantity of marketable goods. 

I am not finding fault with this limitation of the economic 
treatment. It is, I think, consistent with the whole trend 
of a science, taking as its central subject-matter marketable 
goods expressed in monetary values, that it should treat 
population primarily in its relation to the volume of output. 
To ask of economists, as Ruskin did, that they should trans¬ 
late their wealth into terms of ‘life’, was to ask them to merge 
altogether their economic study in the all-embracing science 
and art of human values. For, as we have shown, all mod¬ 
ern attempts at humanising economics, by translating market 
valuations of goods into human valuations of their costs 
and utilities, exhibit these human economic values as in¬ 
separable organic parts of wider vital processes. While it 
is essential that this wider human assessment should take 
place, it cannot be contained within the limits of an economic 
science. But that does not invalidate the policy of an intel¬ 
lectual division of labour, in which a quantitative Economics 
has its proper place. It only requires that Economics shall 
proceed, like other sciences, by a process of abstraction and 
assumptions which are a serviceable falsification, or simpli¬ 
fication, of the subject-matter submitted to this scientific 
treatment. It is a profound mistake of economists to express 


A HUMAN SURVEY 


455 


indignation at the charge that they claim to handle an 
‘economic man’, specialised in selfish gain-seeking, and ad¬ 
dicted to buying in the cheapest, selling in the dearest 
markets. For, while in their inductive studies of economic 
processes they are bound to discover the operation of other 
motives and proclivities, they will in proper conformity with 
their scientific method, regard these as ‘friction’ interfering 
with the purely economic conduct. Whenever economists, 
as such, attempt to fill out their economic man to the full 
stature of humanity, they get into inextricable difficulties. 
In all the deductive framework of an economic science, it is 
right frankly to adopt, in the ‘as if’ spirit, 1 a simplification of 
man, in his capacity of producer-consumer and buyer-seller, 
comformable to the general trend of his activities and con¬ 
duct, though not closely representing the personal and occu¬ 
pational qualifications. In the objective studies, upon a 
statistical basis, to which economics is more and more addict¬ 
ing itself, the consideration of non-economic motives and 
activities are necessarily brought up for purposes of interpre¬ 
tation and, in so far as is admissible, of quantitative 
estimation. 

The new knowledge, acquired by observation and experi¬ 
ment in the field of industrial psychology, is laying a solid 
foundation to an inductive political economy, and is sapping 
the distrust with which the practical business man formerly 
regarded the counsels and prophecies of theoretical econo¬ 
mists. Much of this knowledge, the accurate records of close 
study of economic behaviour, may also be regarded as an 
approach towards a more humanist interpretation of eco¬ 
nomic processes, in so far as it re-inserts in the economic 
plan many of the factors eliminated in the earlier search 
for the laws and principles of a deductive science. 

Much further progress can be made by statistical enquiries 
directed to the study of the interactions of the volume of 
1 Cf. Vaihinger The Philosophy of '.4s if’. 


456 


A HUMAN SURVEY 


production and consumption, treating distribution as an inde¬ 
pendent variable. In particular the structure and variations 
of standards of consumption in different economic communi¬ 
ties and grades of income present a large and well-nigh 
virgin field of study. A strictly behaviourist science of this 
order can supply valuable new funds of economic knowledge 
to the wider art of human government. 

§ 12. But economists, as such, cannot interpret their 
values in terms of human value. The two treatments of 
the population question stand as the most crucial example of 
a necessary divergence of valuation. The economic treat¬ 
ment will remain essentially quantitative, the humanist 
treatment qualitative. The former will seek to answer the 
question ‘How many men can live with the highest average 
standard of economic life upon this area?’ The latter will 
ask, ‘What population will yield the best results in terms of 
human personality as expressed in due satisfaction of all 
physical and spiritual needs?’ 

The contribution of a behaviourist economics to this civi¬ 
lising process will consist in developing a technique and 
organisation which will continually reduce the human costs 
and increase the human utility of economic goods and serv¬ 
ices, thus liberating an ever larger proportion of the growing 
energies of a better natured and better nurtured humanity 
for non-economic activities and enjoyments. 

The success of such an economic art will be registered in 
terms of its effacement. It has been said that ‘The end of all 
good government is to make government superfluous’. May 
it be said that the end of economics is, though not, indeed, to 
render economic processes superfluous, at any rate continu¬ 
ally to reduce the part they play in comparison with those 
“unbought graces of life”, those free creative activities, in 
which production and consumption are fused in costless 
satisfactions. 


Finis. 


APPENDIX 




APPENDIX 

INTRODUCTORY 

Questions 

1. Trace the several steps connecting economic with ethical values. 

2. Should the sphere of ethics be extended from the distinctively 

moral area of “right and wrong” to cover the whole field of 
human welfare? What, if any, changes in the significance 
of the term “ ought ” would such extension involve ? 

3. How far does American experience accord with the modern 

tendency of English economists to qualify economic by 
moral standards of conduct ? 

4. What changes have taken place in the attitude of American 

business men and ordinary citizens towards the policy of 
unfettered private enterprise since the “eighties”? 

5. Is the biological the best starting-point in developing a theory 

of human welfare, or is some “urge” involved in human 
evolution not adequately expressible in biological terms? 

Subjects for Study 

1. The ways in which the factors of personal idiosyncrasy and 

immediate environment interfere with the establishment of 
any objective or generally accepted standard of the desir¬ 
able life. 

2. The pioneer mentality in its reactions upon economic theory 

and practice. 

Books 

W. Fite, Moral Philosophy, Dial Press. 

J. A. Hobson, Free Thought in the Social Sciences, The Mac¬ 
millan Company. 

E. R. A. Seligman, The Economic Interpretation of History, 
Columbia University Press. 

T. Veblen, The Place of Science in Modern Civilization, Viking 
Press, Inc. 

Graham Wallas, Human Nature in Politics, Alfred A. Knopf. 
459 


460 


APPENDIX 


PART I 

CHAPTER I 


Questions 

1. How and to what extent do economic theories influence the 

economic practices of Governments and the business classes ? 
Illustrate from the history of modern capitalism. 

2. What different motifs are traceable in the humanist criticism 

of modern industrialism? 

3. How did Ricardian economics fit into the general theory of the 

Benthamite philosophy? 

4. How far is it right to regard the early classical political 

economy as a defence of the new capitalism? 

Subject for Study 

I. The XlX-th Century humanist criticism in America. 

Books 

T. Carlyle, Latter Day Pamphlets, Charles Scribner’s Sons. 

E. Carpenter, Civilization, Its Cause and Cure, Charles Scrib¬ 
ner’s Sons. 

E. Halevy, The Growth of Philosophic Radicalism, The Mac¬ 
millan Company. 

J. L. & B. Hammond, Life of Lord Shaftesbury, Harcourt, Brace 
& Company. 

J. S. Mill, Autobiography, Columbia University Press. 

John Ruskin, Munera Pulveris — Unto this Last, E. P. Dutton 
& Co. 

H. Thoreau, Walden, A. L. Burt Company, Inc. 

G. Wallas, Life of Francis Place, Alfred A. Knopf. 

CHAPTER II 


Questions 

1. How would you express the different factors in human welfare ? 

2. What qualifications are required to the statement that Life 

is a fine art ? 

3. Are all values “conscious”? 

4. Is there “an original tendency to think”? 

5. In what sense is the intellectual life disinterested? 

6. What is meant by describing man as a “reasonable animal”? 


APPENDIX 


461 


Subjects for Study 

1. The place of play in the economy of Welfare. 

2. The organic approach to a study of Welfare. 

Books 

T. N. Carver, The Economy of Human Energy , The Mac¬ 
millan Company. 

G. A. Coe, The Motives of Men, Charles Scribner’s Sons. 

C. H. Cooley, Social Process, Charles Scribner’s Sons. 

W. McDougall, Contemporary British Philosophy, Outlines of 
Psychology, Charles Scribner’s Sons. Social Psychology , John 
W. Luce & Company. 

A. C. Pigou, The Economics of Welfare, The Macmillan Company. 

E. A. Ross, Social Control, The Macmillan Company. 

Graham Wallas, The Great Society, The Macmillan Company. 

CHAPTER III 

Questions 

1. What different meanings can be given to “group feeling” and 

“a group mind”? 

2. What is the worth of analogies drawn from the life of ants, 

bees, and other social animals ? 

3. Is “organisation” preferable to “organism” as a description 

of human society? 

4. In what sense can values be attributed to associations ? 

5. “This is the paradox of association — of civilization — that 

a man becomes at once more like and more unlike his 
fellows.” Discuss this statement. 

Subjects for Study 

1. The different kinds of good accruing to individuals from 

association. 

2. The part played in social theory by the fear of a “herd mind” 

and “mob-rule.” 

Books 

C. H. Cooley, Social Organization, Charles Scribner’s Sons. 

F. Giddings, Studies in the Theory of Human Society, The Mac¬ 
millan Company. 

M. Ginsburg, Psychology of Society, E. P. Dutton & Company. 
E. W. Hirst, Ethical Love, Allen & Unwin. 


462 


APPENDIX 


L. T. Hobhouse, Development and Purpose, The Macmillan 
Company. 

R. M. Maciver, Community, The Macmillan Company. 
Mukerjee & Sen-Gupta, Introduction to Social Psychology, 
D. C. Heath and Company. 

R. B. Perry, A General Theory of Values, Longmans, Green & 
Company. 


CHAPTER IV 


Questions 

1. To what extent is the adjustment of values in a standard of 

welfare a conscious economy? 

2. How far are standards stable, and how do you express the laws 

of their changes? 

3. Different types of men have different standards. Are they 

equally valid ? 

4. In what ways is a hedonist standard illusory ? 

5. How far are the terms “higher” and “lower” synonymous 

with ‘ 1 self-regarding ’’ and “social”? 

6. Does “the higher life” imply more or less conscious cooper¬ 

ation? 

7. What light does the doctrine that “all men are born equal” 

shed upon the problem of standards of welfare, and how far 
is this doctrine true? 

Subjects for Study 

1. The influence of physical environment in determining stan¬ 

dards of personal welfare. 

2. The validity of “common sense” as a guide to good living. 

3. Standardisation in its effects on personality. 

4. “All progress comes from the initiative and leadership of 

individuals and the acceptance by the mass”. How much 
reason or “real will” is expressed by such acceptance? 


Books 

J. Dewey, Human Nature and Conduct, Henry Holt & Company. 
Count Keyserling, The World in the Making, Harcourt, Brace 
& Company. 

R. M. Maciver, Community, The Macmillan Company. 

G. Tarde, LesLois delimitation, F. Alcan. 

W. Trotter, The Instinct of the Herd, The Macmillan Company. 


APPENDIX 


463 


CHAPTER V 


Questions 

1. “All values are in practice comparable”. Discuss this 

statement. 

2. Compare the extrovert’s hierarchy of values with the into- 

vert’s. Has either an objective validity? 

3. Mens sana in corpore sano. What light does modern 

psychology throw upon the form and validity of this maxim ? 

Books 

Same as for Chapter IV. 


PART II 

CHAPTERS I AND II 


Questions 

1. What does “the economic determination of history” imply, 

and how much value attaches to it? 

2. Discuss Veblen’s claim that economic conditions mould the 

mentality of a people. 

3. Why was Economics so late in its appearance among the 

sciences ? 

4. What part did the physiocrats play in the promotion of 

economic science? 

5. How did Adam Smith’s moral philosophy influence his po¬ 

litical economy? 

6. Trace the different meanings of “Wealth” in the evolution of 

economic science. 

7. What part did J. S. Mill, Stanley Jevons, and Alfred Marshall 

respectively, play in the humanisation or moralisation of 
economics? 

8. How far can “the measuring rod of money” be of service in 

estimating the “psychic income” of a community? 

Subjects for Study 

1. The connection between the rise of Political Economy and the 

Protestant movements. 

2. The difference between the operation of economic laws and the 

laws of the physical sciences. 


464 


APPENDIX 


Books 

James Bonar, Philosophy and Political Economy, The Mac¬ 
millan Company. 

L. H. Haney, History of Economic Thought, The Macmillan 
Company. 

J. A. Hobson, Free Thought in the Social Sciences, The Macmillan 
Company. 

W. S. Jevons, Theory of Political Economy, American Book 
Company. 

A. D. Lindsay, Karl Marx’s 1 Capital ’, Oxford University Press. 
A. C. Pigou, The Economics of Welfare, The Macmillan Company. 
R. H. Tawney, Religion and the Rise of Capitalism, Harcourt, 
Brace & Company. 

Max Weber, General Economic History, Adelphi Company. 
CHAPTER III 

Questions 

1. What was the doctrine of the “invisible hand,” and how far 

was its guidance recognised as distinctively moral ? 

2. How far did the classical “law of distribution” signify that 

each got what he “must” get or what he “ought” to get? 
What meaning do you assign to the statement that under 
free competition each man tends to get “what he is worth” ? 

Subjects for Study 

1. The influences of modern Biology and Psychology upon the 

methods of economic science. 

2. Should distinctively ethical considerations be introduced into 

economic science, or only, as qualifying conditions, into 
economic art? 


Books 

J. A. Hobson, Work and Wealth, The Macmillan Company. 
R. G. Hawtrey, The Economic Problem, Longmans, Green & 
Company. 

J. N. Keynes, Scope and Method of Political Economy, The Mac¬ 
millan Company. 

J. M. Keynes, The End of Laissez Faire, Hogarth Press. 

A. C. Pigou, The Economics of Welfare, The Macmillan Com¬ 
pany. 

W. L. Thorp, Economic Institutions, The Macmillan Company. 


APPENDIX 


465 


PART III 

CHAPTER I 

Questions 

1. Productive energy and capacity to use are the bases of pro¬ 

perty. How are they related? Discuss Locke’s quali¬ 
fication. 

2. What rights of property are essential for self-realisation? 

3. To what extent is it true that “property for power” has 

displaced “property for use”? 

4. How does “the social determination of value” affect the ra¬ 

tionale of property? 

5. Is taxation an invasion of the rights of property, justified only 

by necessities of State? 

6. Discuss the right of inheritance, copyright, patent rights. 

What limits can society reasonably set upon these rights? 

Subject for Study 

1. Changes in the organisation of industry in their reactions 

upon the modern attitude towards property. 

2. Property as a moral Trust justified by its administration. 

Develop and discuss this thesis. 

Books 

B. Bosanquet, The Civilisation of Christendom , Sonnenschen. 

J. L. & B. Hammond, The Rise of Modern Industry, Harcourt, 
Brace & Company. 

Property : Its Duties and Rights, The Macmillan Company. 

J. A. Hobson, The Evolution of Modern Capitalism, Charles 
Scribner’s Sons. 

Werner Sombart, Moderner Kapitalismus, Dunker and Hum- 
blof Miienchen. 

Werner Sombart, Britain’s Industrial Future, E. Benn. 

W. L. Thorp, Economic Institutions, The Macmillan Company. 

CHAPTER II 


Questions 

1. In what ways does education affect the attitude of the workers 

towards their economic lot ? 

2. Why is there less organised discontent among American 

workers than in most European countries? 


466 


APPENDIX 


3. In what ways can industrial peace be best promoted within 

the confines of the single business ? 

4. What do you understand by a “subsistence”, a “living”, a 

“fair”, and a “reasonable” wage? How far can these 
terms be made applicable to the reward of capital ? 

5. How far does modern industrial organisation tend to sub¬ 

stitute opposition of trades for the conflict of capital and 
labour in the several trades? 

6. What do you understand by “the surplus”? How does the 

use of this term here differ from the Marxian use ? 

7. What part does the law of “diminishing return” play in 

explaining the mal-distribution of wealth ? 

8. What ethical significance attaches to the power of “high 

finance”? 

Subjects for Study 

1. “Allowing for friction and some maladjustment the economic 

system deals substantial justice”. 

2. The proper functions of an economic surplus. 

Books 

Edwin Cannan, Wealth, P. S. King & Son. 

G. Cassel, The Theory of Social Economy, Harcourt, Brace & 
Company. 

Henry Clay, Economics, The Macmillan Company. 

J. A. Hobson, The Industrial System, Charles Scribner’s Sons. 
J. A. Hobson, The Conditions of Industrial Peace, The Mac- 
'millan Company. 

A. J. W. Keppel, The Theory of the Cost-Price System, Allen & 
Unwin. 

J. Haldane Smith, Collectivist Economics, Rutledge. 

F. W. Taussig, The Principles of Economics, The Macmillan 
Company. 


CHAPTER III 


Questions 

1. Under what conditions does a market distribute the gains 

of its buying and selling equally among the participants? 

2. What are the peculiar circumstances of a labour market which 

differentiate it from other markets? 


APPENDIX 


467 


3. In what different forms does “surplus” emerge from the 

processes of bargaining? 

4. Is marketing conducive to the sense of social service ? 

Subjects for Study 

1. Examine the opposing tendencies towards combination and 

free competition in the modern economic system. 

2. The use and abuse of the “Crusoe” economics. 

Books 

O. F. Boucke, Principles of Economics, The Macmillan Company. 
E. Cannan, Wealth, P. S. King & Son. 

J. A. Hobson, The Industrial System, Charles Scribner’s Sons. 
4. Marshall, Principles of Economics, The Macmillan Company. 
E. D. Page, Morals in Modern Business, Yale University Press. 

PART IV 

CHAPTER I 

Questions 

1. Discuss the moral validity of the communist formula: “From 

each according to his powers, to each according to his needs ”. 
Under what conditions can it be successfully applied ? 

2. How far do recent changes in industrial organisation evoke 

or repress a sense of social service? 

3. What is meant by a Functional Society ? 

4. Discuss Laski’s criticism of the “needs formula”. 

5. “A conscious minority always rules in politics, business, and 

other social activities”. In what sense is and must this 
remain true? 

6. Does the equality of man justify equality of income ?. 

7. Socialism is said to involve (a) confiscation of private pro¬ 

perty ( b ) diminution of personal liberty (c) compulsory 
labour ( d ) inefficient bureaucracy (e) political corruption. 
Discuss these charges. 

8. Is any modus vivendi possible between Socialism and private 

enterprise? 

Subjects for Study 

1. “ Equality of Opportunity ” as a moral and economic principle. 

2. There is a natural relation between intake of food and output 


468 


APPENDIX 


of energy. How far is this capable of development into a 
natural law of distribution for work and income? 

Books 

H. Dalton, Inequality of Income, Rutledge. 

H. J. Laski, A Grammar of Politics, Yale University Press. 
H. J. Laski, Communism, Henry Holt & Company, or Williams 
& Norgate. 

H. J. Laski, Britain’s Industrial Future, E. Benn. 

A. D. Lindsay, Karl Marx’s ‘Capital’, Oxford University Press. 
R. H. Tawney, The Acquisitive Society, Harcourt, Brace & 
Company. 


CHAPTER II 

Questions 

1. Criticise the hierarchy of occupations as given on page 244. 

2. Suggest other bases than “creative activity” for a hierarchy. 

3. Is the main incentive of an artist self-expression, love of 

beauty, or communication of feeling? 

4. If the fine arts were socialised, what would happen to them? 

Here consider Education as a fine art. 

5. Is pay, or profit, a motive of diminishing importance for the 

big business man? If so, what other motives are reducing 
its predominance? 

6. Is the economic system economically administered as regards 

the money prizes offered to successful business men? 

7. What can publicity and education do towards creating a 

widespread and stronger “sense of social service” ? 

Subject for Study 

Types of successful business men in America. 

Books 

J. M. Clark, The Social Control of Business, University of 
Chicago Press. 

Henry Ford, My Life and Work, Doubleday-Doran & Company. 
J. A. Hobson, Incentives in the New Industrial Order, A. & C. 
Boni. 

Sir J. Stamp, Morals in Modern Business, Yale University Press. 
Sir J. Stamp, The Christian Ethic as an Economic Factor , Eps- 
worth Press. 


APPENDIX 


469 


CHAPTER III 

Questions 

1. Distinguish the several “claims” of Labour and their relative 

importance in the modern mentality of workers. 

2. Does most wage-work tend to become less interesting ? 

3. In what different ways are the workers obtaining a voice in the 

control and management of business? 

4. How would you construct a “representative” government 

for (a) a business (b) a trade, and what part would labour 
play in such government? 

5. Examine the statement that modern machinery mechanises 

the worker. 

6. Does machinery lighten the burden of labour ? 

7. “Some dangerous, disagreeable, and degrading work is neces¬ 

sary to the welfare of the community”. Is this true, and if 
so, how should it be obtained ? 

8. How far is the prosperity of the United States due to better 

application of incentives to efficient labour ? 

Subjects for Study 

1. The relations between higher productivity and better dis¬ 

tribution of the product. 

2. Examine the case for and against “Family Allowances”. 

3. Modern industrialism means city life. The general effects of 

this centralisation of population upon character and welfare. 

Books 

C. Delisle Burns, The Philosophy of Labour , Oxford Uni¬ 
versity Press. 

E. M. Burns, Labour and the State, P. S. King & Son. 

J. M. Clark, The Empire of Machines, Yale Review, October 
1922, Vol. XII, No. 1. 

Paul H. Douglas, Wages and the Family, University of 
Chicago Press. 

J. A. Hobson, Incentives in the New Industrial Order, A. & C. Boni. 
E. Rathbone, The Disinherited Family, Longmans, Green & 
Company. 

CHAPTER IV 

Questions 

1. How does the function of the capitalist appear to himself and 
to the wage-earners? 




470 


APPENDIX 


2 Distinguish the sources of saving. How are the proportions 
between saving and spending adjusted for the national 
income? 

3. Describe the mechanism for collection and distribution of the 

general investment fund. 

4. Would a more equal distribution of income cause under-saving 

and retard industrial progress? 

Subjects for Study 

1. The effect of a rise or fall of rate of interest upon the volume 

of savings. 

2. Veblen’s charge of “financial sabotage”. 

Books 

H. Abbati, Unclaimed Wealth, The Macmillan Company. 

E. C annan, The Economic Outlook, Viking Press, Inc. 

Foster & Catching, Profits, Houghton Mifflin Company. 

J. A. Hobson, The Economics of Unemployment, The Macmillan 
Company. 

T. Veblen, Engineers and the Price System, Viking Press, Inc. 
CHAPTER V 


Question 

1. Why has consumption received so little attention from econ¬ 

omists as a subject of study? 

2. “Trial and error throughout the ages secure right food stan¬ 

dards for most human groups”. Discuss this statement. 

3. How are the standards of expenditure determined for the 

nouveau riche in America and England respectively ? 

4. “Give me the luxuries of life and I will dispense with the 

necessities”. What amount of economic truth does this 
boast contain? 

5. How far is the “simple life” desirable? 

6. How far should “experts” regulate our standards of living? 

7. Is sumptuary legislation desirable? If so, within what 

limits? 

Subjects for Study 

1. The conservatism of standards of Consumption as compared 

with progressivism in methods of Production. 

2. The aim of education should be the building up of resistance 

to mass-suggestion and advertisement. 


APPENDIX 


471 


3. Consumption as a fine art. 

4. The place assigned to Consumption in the authoritative works 

of Political Economy. 

5. The growth of “communal consumption”. 

Books 

L. H. Haney, History of Economic Thought , Ch. xxviii,, The 
Macmillan Company. 

S. N. Patten, The Consumption of Wealth, Press of the Uni¬ 
versity of Pennsylvania. 

R. G. Tugwell, Industry’s Coming of Age, Harcourt, Brace & 
Company. 

CHAPTER VI 


Questions 

1. How far can the Population Question be regarded as dis¬ 

tinctively economic ? 

2. Explain the meaning of the term “ Optimum Density ” regarded 

from the standpoint of a self-contained nation. 

3. How far does “the niggardliness of nature” continue to be 

the final determinant of an Optimum Population? 

4. Can any valid statistics of “racial” or “national” value be 

adopted? 

5. What place does immigration policy hold in the quantitative 

and qualitative aspects of the Population Question? 

6. Can competitive economic success be regarded as a valid test 

of human values? 

7. What truth is there in Dean Inge’s aphorism: “ We don’t know 

what sort of people we want, but we do know what sort of 
people we don’t want ” ? 

8. How far does the principle of “reversion to the mean” affect 

the worth of eugenic policies? 

Subjects for Study 

1. The human value attributed to life per se must have an effect 

upon our estimate of “Optimum Density”. 

2. The possible contribution of eugenic science to the production 

of a desirable population. 

3. The fluctuations in the interest attached to the Population 

Question from the time of Malthus. 


472 


APPENDIX 


Books 

J. Bonar, Philosophy and Political Economy, The Macmillan 
Company. 

A. M. Carr-Saunders, The Population Question, Oxford Uni¬ 
versity Press. 

Leonard Darwin, The Need for Eugenic Reform, D. Appleton 
& Company. 

H. P. Fairchild, Immigration, The Macmillan Company. 

T. Malthus, Essay on Population, E. P. Dutton & Com¬ 
pany. 

E. A. Ross, Standing Room Only, Century Company. 

E. A. Ross, The Old World in the New, Century Company. 

Harold Wright, Population, Harcourt, Brace & Company. 

CHAPTER VII 


Questions 

1. What is the meaning of the term “rationalisation” and how 

far does the process go towards a rational government of 
industry? 

2. What are the interests of the State in the efficiency and 

humanity of industry, and how far is the existing State 
competent to secure these interests ? 

3. Is the omnicompetent political State destined to give place to 

a self-declared and accepted government by scientific and 
business experts? 

4. Distinguish the proposals of Syndicalism, Guild Socialism, a 

Cooperative Commonwealth. 

5. Describe the Webbs’ Constitution of the Socialist Common¬ 

wealth for Great Britain . Apply it to the United States, 
stating how far you consider it desirable and feasible. 

6. What line would you draw between public and private owner¬ 

ship and administration of industries? 

7. How far does the development of the modern State tend to 

secure a better distribution of wealth and opportunities? 

Subjects for Study 

1. The anti-democratic tendencies of modern States in their 

bearing upon economic government, “Conscious Minor¬ 
ities” in Fascism, Bolshevism, etc. 

2. “The political State, not previously designed for important 


APPENDIX 


473 


and delicate acts of economic government has been drawn 
too rapidly into work for which it is ill-equipped”. Assess 
the value of this judgment. 

Books 

G. D. H. Cole, Self-Government in Industry , Harcourt, Brace & 
Company. 

W. Y. Elliot, The Pragmatic Revolt in Politics, Macmillan 
Company. 

H. M. Kallen, Freedom in the Modern World, Coward-McCann. 
H. J. Laski, A Grammar of Politics, Yale University Press. 

G. B. Shaw, The Intelligent Woman’s Guide to Socialism, Brentano. 
W. K. Wallace, Thirty Years of Modern History, The Macmillan 

Company. 

Graham Wallas, The Great Society, The Macmillan Company. 
S. & B. Webb, Constitution of the Socialist Commonwealth for 
Great Britain, Longmans, Green & Company. 

H. G. Wells, The Open Conspiracy, Doubleday-Doran Co. 

CHAPTER VIII 

Questions 

I. Have the inhabitants of a country a reasonable right to refuse 

to develop its natural resources and to deny outsiders facili¬ 
ties for doing so ? 

2. To what extent is “Free Trade” a moral issue? 

3. How is the economic factor blended with other factors in 

modern Imperialism? 

4. What is signified by “inter-imperialism” and how far is it 

likely to go ? 

5. What do nations mean by their vital interests? To what 

extent are these interests the gains of groups within the 
nation? 

Subjects for Study 

1. The mandatory principle of the League of Nations as a basis of 

equitable relations between advanced and backward peoples. 

2. Evidences of the advance of economic internationalism. 

3. The ethics of the conflict of loyalties to country and humanity. 

Books 

H. N. Brailsford, Olives of Endless Age, Harper. 

G. L. Dickinson, Justice and Liberty , Doubleday-Doran & 
Company, Inc. 


474 


APPENDIX 


P. T. Moon, Imperialism and World Politics, The Macmillan 
Company. 

N. Pfeffer, The White Man’s Dilemma, The John Day Co., Inc. 
L. Woolf, Economic Imperialism, Labour Press. 

CHAPTER IX 


Questions 

1. How do irrational attitudes towards money affect public 

policy? 

2. “Inflation is the mortal sin of finance”. Illustrate from War 

and post-War experience. How do you distribute the 
responsibility for inflation? 

3. What public controls over issue of credit exist, and are they 

adequate? 

4. “The final control of the monetary system must be inter¬ 

national.’ ’ How far is this necessary and practicable ? 

Subjects for Study 

1. Money as a moral factor in civilisation. 

2. The ethics of stabilisation of prices. 

3. “Credit is faith that works”. 

Books 

Irving Fisher, The Money Illusion, Adelphi Company. 

R. G. Hawtrey, Monetary Reconstruction, Longmans, Green & 
Company. 

J. M. Keynes, A Tract on Monetary Reform, Harcourt, Brace & 
Company. 

W. T. Layton, An Introduction to the Study of Prices, The Mac¬ 
millan Company. 

E. M. H. Lloyd, Stabilisation, Alfred A. Knopf. 

D. H. Robertson, Money, Harcourt, Brace & Company. 

CHAPTER X 

Questions 

1. How far does progress depend upon strengthening the con¬ 

scious social control of the economic system? 

2. Are there important classes of producers who would refuse the 

full use of their productive powers if remunerated on a 
“needs” or an equalisation basis? If so, on what basis 
must they be remunerated ? 


APPENDIX 


475 


3. How far is speculation distinguishable from gambling, and 

what part does it play as a factor in economic progress ? 

4. If our chief economic problems were satisfactorily solved 

would human nature stagnate ? 

5. Are the difficulties of converting an “acquisitive” into a 

“functional” society superable? 

Subjects for Study 

1. “In a genuinely progressive society economic activities would 

play a continually diminishing part”. 

2. Science as the deliverance of man from economic bondage. 

3. “Equity and economy alike demand that land and other 

natural values should not continue to yield private in¬ 
comes”. The obstacles which beset the application of this 
rule of conduct. 


Books 

J. A. Hobson, Work and Wealth , The Macmillan Company. 
W. A. Robson, The Relation of Wealth to Welfare, The Mac¬ 
millan Company. 

O. Spengler, The Decline of the West, Vol. II., Ch. IV and V, 
Alfred A. Knopf. 

R. H. Tawney, The Acquisitive Society, Harcourt, Brace & 

Company. . . 

Graham Wallas, Our Social Heritage, Yale University Press. 
H. F. Ward, Our Economic Morality, Yale University Press. 







INDEX 








INDEX 


Activities, and society, 245, 246; 
creative, 245; hierarchy of, 244; 
incentives to, 244, 245; profes¬ 
sional, 245, 246; socialisation of, 
245-247 

Agriculture, collapse of, x; contrast 
between manufacture and, 346-349 
America, standardisation in, 324, 325 
American, one hundred percent, 324 
American Mercury of 1792, 369 
Anarchism, vii. See also Commun¬ 
ism, Individualism , and Socialism 
Ant morality, 54, 55 
Appetites, importance of quantita¬ 
tive, 308, 309 

Aquinas, St. Thomas, quoted, 163 
Arbitration, compulsory, 173 
Aristotle, 87, 129, 275 
Arnold, Matthew, 114; quoted, 335 
Artist, the, and life, 66; and science, 
66, 67; and standardisation, 326, 
• 327 

Association, causes of failure of, 43; 
dangers of, 35-39 ; members of, 36, 
37 ; paradox of, 33, 34 ; political, 
41; relation of, to personality, 33- 
41; requisites of, 40, 41; test case 
of, 41; values of, 34-40; widening 
of, 36 
Athens, 30 

Australia, immigration policy of, 
357; nationalist position of, 395 
Austrian utility economists, 306 
Automobile, economic effects of the, 
337, 338 

Backward countries, and commun¬ 
ism, 220, 221; and inter-imperial¬ 
ism, 402, 403; effects of civilisation 
on, xxvii, xxviii, 329, 336; exploi¬ 
tation of, 393 ; imperialistic policy 
towards, 392, 393; mandates for, 
393, 394 ; problem of, 57, 452, 453 ; 
regulation of population of, 354- 


356; relations of, with industrial¬ 
ised, 391, 392; rights of, 392 
Balance of trade, and money, 411 
Balfour, Arthur, viii 
Bank-credit, part of, in supply of 
capital, 280-283. See also Credit 
Bank inflation. See Inflation 
Bankers, influence of, on price fluctu¬ 
ations, 421-423 

Bargaining, and dishonest money, 
426; and personality, 213; and 
surplus, 212; collective, vii, 179; 
defects of, 217; equality in, 90; 
ethics of, 201-213 ; explanation of, 
201; illustrations of, 203-205; in¬ 
equality of, xi, xii, xv, 204-206,210- 
212; justice in, 212; sales outside 
of, 201, 202; selfishness of, 213; 
waste in, xii 

Barker, Dr. Ernest, quoted, 27, 32 
Barter, 3 

Bax, Balford, viii, xii 
Beauty, in life, 12, 13 
Bennett, Arnold, 248 
Bentham, 5, 99 
Besant, Annie, ix 

Beveridge, Sir W., quoted, 294 (note) 
Biological survival, 78 
Biological urge, of species, 36 (note) 
Biology, xvii 

Birth-control, 182, 340-344, 451. 

See also Eugenics 

Body, relation of mind to, xxi, 15, 21, 
22 

Bohm-Bawerk, 306 
Booth, Charles, vii 
Bosanquet, Bernard, 397, 398; 

quoted, 144, 156 
Bradley, F. H., 13 
Branford, 79, 80 (note) 

Brassey, Sir Thomas, viii 
Budget, family, 307, 337, 338 
Burns, C. Delisle, 226 
Burns, John, viii 


479 




480 


INDEX 


Business, and politics, 377-79; as a 
separate unit, 167-178; as a social 
organisation, 432; control of, 375; 
dangers of secrecy in, 424, 425; 
disadvantages of small, 211; drift 
towards public control of, 242, 243 ; 
lack of cooperation in, 372, 373; 
misrepresentation of facts in, 425; 
new conception of, 374; poor 
organisation of, 372, 373, 433 ; so¬ 
cialisation of, 441, 442 
‘Business is Business,’ 91 
Business-man, early type of, 248; 
present type of, 249, 250; social 
desirability of, 366 


Cairnes, J. E., 237 ; quoted, 236 
Cannan, Dr. Edwin, 346, 349; 

quoted, 102, 164, 165, 294, 295 
(note) 

Capital, and Desired and Desirable, 
285; and interest, 290-293; and 
Labour, viii; creation of, 147, 284; 
lack of freedom of, 208; struggle 
between Labour and, 169-179; 
supply and distribution of, 293, 
294; time-element in, 284 
Capitalism, and bank credit, 280- 
283; and imperialism, 397; and 
inter-imperialism, 402 ; and social¬ 
ism, 277; criticism of, ix, 7, 112; 
early, 275, 276 ; ethics of, 274, 275 ; 
international, 401, 402; justifica¬ 
tion of, 112-137 ; meaning of, 277, 
278; workers’ attitude towards, 
275, 276 

Capitalist system, vii; defence of, 8, 
9; indictments of, 7-9 
Captains of Industry, importance of, 
250, 251, 438, 439 
Carlyle, vii, 7 
Carpenter, Edward, 7, 260 
Carr-Saunders, 346, 351, 359, 365 
Carver, 114 

Catholic Church, The, 34 
Central directive agency in social 
life, 45 

Champion, viii 

City, the, differences between the 
country and, 260-262; human 
values of, 260-263 

Civilisation, and consumption, 314, 


315; conditions for an ideal, 453; 
definition of, 311 
Class-consciousness, 9 
Collective bargaining. See Bargain¬ 
ing 

Combination, as instrument towards 
internationalism, 401, 402; defects 
of, 217; rise of, 388 
‘Common consciousness,’ 24, 25 
‘Common experience,’ international 
value of, 398, 399; widening of, 398 
‘Common good,’ xxv 
Common sense, as safeguard of de¬ 
mocracy, 41; as sensus communis, 
32 

Communism, and human nature, 236, 
237 ; defence of, 222, 223 ; dislike 
of, 219, 220; imposition of, 221, 
222 ; in Russia, 223, 224, 379 ; ob¬ 
stacles to, 222, 223, 236, 237; and 
war, 221, 404, 405. See also 
Socialism 

Community, the, 23, 24; and person¬ 
ality 77, 78, 167, 168; and saving, 
299, 300; and the individual, 

xviii, xix, 165, 166; as a person¬ 
ality, 167 ; function of, xviii; ideal, 
361, 362; in economics, 77, 78; 
structure of, xviii; value of, 29, 
30. See also Society and Associa¬ 
tions 

Community Mind, 28, 29, 31 
Community Sentiment, 28. See also 
Community Mind 

Compensation. See Remuneration 
Competition, 8, 9 ; as factor in price¬ 
fixing, 204, 205; defects of, 217; 
lack of freedom of, 211, 212; sur¬ 
vival of, 388; triumph of combina¬ 
tion over, 188 
Comte, 130; quoted, 96 
Conformity, social, 39 
Consciousness, creative, 326 
Consumer, the, xiii; and economic 
government, 381; relation of, to 
expertise, 335, 336. See also Con¬ 
sumption 

Consumption, xvii; and civilisation, 
314, 315 ; and income, 305 (note); 
as a fine art, 327, 449; attitude 
of early economists towards, 302; 
defects of convention in, 311; de¬ 
sired and desirable, 309, 310, 313, 






INDEX 


481 


314; evolution of, 336; family, 
307, 308, 311, 312; in economic 
system, 327; individual, 326; in¬ 
terrelation of production and, 273, 
278, 306, 316, 317, 320, 326, 327, 
337-339; investigations of, 306- 
308; maladjustment of, 312-314; 
neglect of importance of, 301-306 ; 
neglect of scientific study of, 327, 
328; quantitative, 307-309 ; regu¬ 
lation of, 329-333; standardisation 
of, 320, 321; study of, 304-306 
Contemporary British Philosophy , 
quoted, 12 

Contract, freedom of, 93, 94 
Control, social. See Social Control 
Cooperation, part of, in economic 
system, 431, 432 

Costs, biological, xvii, xviii; human, 
iii; ‘net,’ iii; maintenance, 189, 
190; surplus and, 190-193 
Costs and utilities, 107 ; difficulty of 
estimating, xxiii-xxv; distribution 
of, 208; explanation of, 206, 207 ; 
in labour, 207, 208; relation of 
to market, 206, 207 
Countries, backward. See Backward 
Countries 

Country, the, value of, 261; conflict 
between town and, 180-182. See 
also City 

Craftsman, the, and standardisation, 
326, 327 

Creative activities, dangers of social¬ 
ising, 246, 247. See also Activities 
Credit, moral meaning of, 408; over¬ 
issue of, 422; regulation of, 421. 
See also Bank Credit 
Crusoe economy, 77, 207, 208, 286 
Culture, 21; and property, 157-161; 

over-valuation of, 61 
‘Curiosity’, 18, 19 
Currency, international, 427-429 


Dalton, Hugh, 230 
Darwin, Charles, xxii 
Davis, Professor, quoted, 26, 27 
Democracy, alleged failure of, 41; 

and common sense, 41 
Descartes, 226 

Desired and Desirable, adjustment of, 
334; in birth control, 343; in 


consumption, 309, 310, 313, 314; 
in creation of capital, 285; in eco¬ 
nomics, 127, 128, 328; in human 
types, 363-368; index of, 52, 53; 
instruction in, 54; harmony be¬ 
tween, 57, 58 
Dickens, Charles, vii 
Dilke, Sir Charles, viii 
Directorship, futility of, 249 
Distribution, according to ability to 
use, 428; and decline of prices, 
416; as regulator of supply of 
capital, 293-295; case for equality 
of, 295, 296-299 ; case for inequal¬ 
ity of, 294, 295 (note), 296-299; 
economic, x; natural regulation of, 
117; of economic progress fund, 
314-316 ; of investment fund, 297, 
298; relation of production to, 272, 
273; right principle of, 399,400; 
through stabilisation, 345, 426, 
434 

Dividends, under communism, 239, 
240 

Economic activity, incentives to, 
225 

Economic determinism, 78-81, 84 
Economic development, internation¬ 
alism of, 395, 396 

Economic government, 184, 185, 372- 
381; Wells’s conception of, 378, 
379 ; Wallace’s conception of, 378, 
379 ; functions of, 442-444; limi¬ 
tations of, 186 

Economic individualism. See Indi¬ 
vidualism 

Economic interests, importance of, 
391, 447 

Economic internationalism. See In¬ 
ternationalism and International 
Government 

Economic laws, 122-125 
Economic Progress Fund, use and 
misuse of, 314-316 

Economic resources of world, ob¬ 
stacles to best organisation of, 447, 
448 

Economic science, and human values, 
454-456; humanisation of, ix; 
limitations of, 454 
Economic self-determination. See 
Self-determination 




482 


INDEX 


Economic system, the, and human 
nature, 227; alteration of, 227, 
271-273; check of, on price level, 
417; classification of, 97; com¬ 
plexity of, 432; conflict of, with 
welfare, 271; cooperation in, 188, 
189, 431, 432; defects of, 184, 210, 
217,218,252 ; demands of, 168-170 ; 
discord in, 188-190 ; early concep¬ 
tion of, 96, 97, 112-122; effect of 
dishonest money on, 426 ; efficiency 
of, 168-170; eighteenth century, 97; 
equity of, 168-170; humanisation 
of, 44-47; in England, 97, 98; 
internationalism of, 390; justice of, 
207; success of, 187, 188; worker’s 
discontent with, 170, 171 
Economic thinking, early fallacies of, 
122,123 

Economic Values. See Values 
Economics, and birth-control, 341, 
342 ; and peace, 401; and politics, 
91-94; and religion, 81, 82, 88-91; 
and the State, 381-385 ; as satisfac¬ 
tions and dissatisfactions, 103; as 
separate science, 3, 86-99, 130-136 ; 
behaviorist, 456; communal and 
individual, xxii, xxiii; early hy¬ 
pothesis of, 105, 106; ethical trans¬ 
valuation of, 89-90; human valu¬ 
ation of, xxvii; impossibility of 
ethical application to, 236, 237; 
influence of, 79-83; interaction of 
non-economic factors and, xx-xxiii, 
108; laws of, 94-96 ; meaning of, 
84, 85; mechanical concept of, 
117-122; neglect of consumption 
by, 327, 328; ‘ought’ in, 125, 126; 
qualitative and quantitative, 108, 
109 ; scope of science of, 99, 100 ; 
statistical study of, 105-111; sub¬ 
ordination of, to ethics, 6, 7, SO¬ 
SO, 127-129, 132, 133 ; terminology 
of, 86; values in, 86 
Economics of Industry , 101 
Economics of Welfare, 102; quoted, 
10, (note) 

Economists, early, attitude of to¬ 
wards consumption, 302 
Economy, as Calculus of Pleasure 
and Pain, ix 

Economy, Political. See Political 
Economy 


Eden, 306 

Education, xxv, xxvi; agreement on, 
59; function of, xxix, xxx, 247 
Eighties, the, xi 
lillan vital, 15 

Elliott, Dr. W. Y., quoted, 28 (note) 
Emigration, determination of, 356, 
357. See also Migration 
Encyclopaedia Britannica, 132 
Energy, and happiness, 114 
Engels, 7 

Environment, and heredity, 360, 
361; and organism, 79, 80 ; man’s 
influence on, 80 

Equality of Opportunity, 42, 43 
Equity of Opportunity, 43 (note) 
Ethical Values. See Values 
Ethics, and capital, 274, 275; and 
Political Economy, 126-129; as 
art of valuation, 46 ; autonomy of, 
129; character of, 11-13; com¬ 
mercial, 94; of bargaining, 201- 
213; relation of, to economics, 6, 7 
Eugenics, 359-368. See also Birth- 
control 

Evil and error, as exceptions, 57 
Evolution, creative, 72; general, 14, 
15 ; industrial, 321, 322 
Expertise, dangers of, 40, 336, 337; 
in consumption, 334-336; values 
of, 40 

Exploitation, unrestricted, 254 
Exports and Imports. See Imports 

Fabian Essays in Socialism, ix 
Fabian Society, the, ix 
Fairchild, H. P., 309 
Fall of Man, 56, 57 
Family, the, 4, 23; f and birth-control, 
340-344; and communism, 220; 
and consumption, 307, 308, 311, 
312; as an association, 34, 35; 
causes of maladjustment of, 312, 
313 ; value of, 35 

Farmers. See Country and Town 
Federalism, explanation of, 135, 136 
Fenno, Marco, quoted, 282 (note) 
Finance, organised, 433 
Fisher, Irving, 290 (note), 414 
Five-day week, 325 
Food, adjustment of, 311-313 
Ford, Henry, 273 
Free markets. See Markets 



INDEX 


483 


“From each according to his powers, 
to each according to his needs.” 
See ‘ Needs' economy 
Functional Society. See Society 

Gains. See Profits and Surplus 
Geddes, 79, 80 (note) 

George, Henry, ix 
Giddings, Professor, 31 
Glands, ductless, 22 
‘Good,’ the, 12, 13 
Gossen, 303, 306 

Government, economic. See Eco¬ 
nomic Government 
Government regulation, 333, 334 
Group-mind, 26, 27. See also Social 
Mind 

Guild of St. Matthew, ix 

Happiness, and activity, 114; and 
income, 106 (note), 107 (note) 
Harmony, natural. See Natural 
Harmony 

Harrison, Frederick, viii 
Hawtrey, R. C., economic theory of, 
126-128 

Hearn, Lafcadio, 54 
Herd-mind, 28, 223. See also Group- 
mind and Social Mind 
Heredity, and environment, 360, 361; 
transmission of characteristics by, 
359-361 

Hobbes, 92 ; quoted, 17 
Hobhouse, L. T., 18, 20, 78, 131; 

quoted, 26, 148, 149 
Holism and Evolution, 14 (note) 
Horm6, 15 

Hours, working. See Working Hours 
House of Commons, the, 34 
Housing problem, the, and birth- 
control, 342 

Human costs, of disagreeable work, 
259, 260, 269, 271; of city life, 
261; reduction in, 260, 271 
Human Factor in Industry. See 
Industry 

Human nature, vi; and communism, 
222-225; and economic changes, 
227; as an obstacle, 218; changes 
in, 227, 234, 235 
Human survival, 73 
Humanism, naturalness of, 398, 399 
Humanity, problem of, xxiv-xxv 


Hume, David, 303 
Huxley, T. H., xx 
Hyndman, viii 

‘Illth,’ and wealth, iv, viii 
Immigration, defence of restrictive, 
395 ; in Australia, 357 ; restrictive, 
357, 358. See also Emigration and 
Migration 

Imperialism, and capitalism, 397, 
effect of on peace, 401; issues of, 
391 (note) 

Imports and exports, interrelation of, 
411, 412 

Incentives, and activities, 244, 245; 
and equity of distribution, 243, 
244; problem of, 240, 241 
Income, and happiness, 106 (note), 
107 (note); and optimum density, 
349-352; and price stabilisation, 
418, 419, 426; application of gen¬ 
eral, 278; as wealth, 103 ; defence of 
equal, 295-299; defence of unequal, 
294, 295 (note); distribution of, xi, 
xiii, xiv, 120, 230, 231; equalisation 
in, 232,233; insufficiency of general, 
272, 273; national, 278, 279, 

(note); psychic, 128-130, 133; 

state distribution of, 383 
Individual, the, 165, 166; and so¬ 
ciety, 32, 50, 56, 57, 319, 320, 332, 
333 ; and the community, 165,166; 
as a social being, 23, 24, 68, 69; 
relation of, to associations, 34; 
the ideal, 361, 362; subjection of, 
to race, 55 

Individual differences, iii, 52 
Individualism, 324; defence of, 115, 
116; doubts about, 117, 118; dif¬ 
ference between socialism and, 
251; economic, 117, 118. See also 
Anarchism 

Industrial Court, 173 
Industrial government. See Eco¬ 
nomic government 

Industrial organisation, rearrange¬ 
ment of, 243, 244 

Industrial peace, difficulties in secur-. 
ing, 170-183 

Industrial Reconciliation Conference, 
viii 

Industrial Revolution, the, 5 ; influ¬ 
ence of, 83, 90, 91 



484 


INDEX 


Industrialism, advantages of, 444 
Industries, conflict beween, 176-187 
Industry, complexity of, 432 ; equit¬ 
able organisation of, 242, 243 ; im¬ 
portance of leaders in, 250 ; social 
process of, 431-433; the human 
factor in, 9 

Inflated money, dangers of, 419, 420 
Inflation, * bank, 281-283; causes of 
deflation and, 288 
Inge, Dean, 363 
Ingram, Dr., 132 
Instincts, 17, 18, 23 
Intellectuals, the, 28 
Interest, xii; as regulator of supply 
of capital, 290-293; condemnation 
of, 275, 276 

Inter-imperialism, 402, 403 
International Chamber of Com¬ 
merce, 402 

International government, 390-400 
Internationalism, xxii, xxiii; as 
regulator of population, 453; eco¬ 
nomic, xxiii, xxiv, 401-404 ; educa¬ 
tion and, xxix, xxx ; ethical nature 
of, xx, xxv, xxviii-xxx 
Interstate Commerce Board, 386 
Invention and industry, 247, 248 
Investment system, defects of, 296- 
299 

Investments, war’s influence on, 412 
Investor, the, attitude of, towards 
money, 410 

‘Invisible Hand,’ doctrine of, 90, 
115, 116, 156, 168, 185, 186 

Jevons, ix; economic theory of, ix, x; 

quoted, 101, 103, 303 
Joint-stock companies, features of, 
249 

Jones, Benjamin, viii 

Keynes, J. M., 127,156; quoted, 242, 
294 (note), 410, 412 
Keyserling, Count, quoted, 163 
Kingsley, vii, 7 

Labour, and personality, 207; and 
religion, 84 ; and utility, 207 ; as an 
end, 88, 89, 114; disagreeable, 225, 
226, 269, 270, 435; division of, xx ; 
human costs of, 209, 210; in 
Crusoe economy, 207, 208; ineffi¬ 


ciency of servile, 236; influence 
of, 80-83; intrinsically interesting, 
258, 259 ; lack of freedom of, 208; 
organised, 179; reduction of rou¬ 
tine, 446, 447; sale of, 208, 209; 
social significance of, 226, 227; 
struggle between capital and, viii, 
169-179; unskilled, x, xi; value of 
change in, 258, 259; voice of, in 
business, 374; workers’ attitude 
towards, 225-227 
Labour-contract, 209, 210 
Labour parties, rise of, xii, xiii 
Labour Party Independent, ix, Scot¬ 
tish, ix; 

Laissez-Faire economy, 117-120, 329 
Land, as monopoly, 202; as surplus, 
192 ; in primitive society, 142 
Landlordism, ix 
Laski, 231; quoted, 232 
Lassalle, 7 

Law of Diminishing Returns, xxii, 
182; and population, 345, 346; 
in agriculture, 347-349 
Laws, social, 94-96 
League of Nations, xiii 
Learning and Leadership , xxiv 
Lehfeldt, Professor, 415 
Leisure, distribution of, 234, 235 
Le Play, 79, 328 
Leslie, Cliffe, quoted, 116 
Leviathan, 92 

Liberal Industrial Inquiry, 386 (note) 
Liberal Party, 34 
Libido, 15 

Life, and the artist, 66; as a fine art, 
xvii, 47, 48; quality vs., quantity 
of, xxii, xxiii; value of per se, xxvi, 
344, 353 

Locke, John, 92, 142, 143 
Loyalties, conflicting, 399 
Luxuries, 330 

McCulloch, 99; quoted, 294 (note) 
McDougall, Professor, quoted, 15, 18 
Machinery, problem of, 9, 322, 323, 
325; and standardisation, 83, 84; 
relation of, to worker, 260; social 
effects of, 338; social control of, 
339; superiority of, over manual 
labor, 258 

Maciver, 11, 29; quoted, 26, 35, 71 
Mackenzie, J. S., 12 



INDEX 


485 


Malthus, 100, 345, 346 
Man, as an individual, 222; as a so¬ 
cial being, 222 

Mandates, need for amplification of, 
394, 395 ; underlying principles of, 
393, 394 

Manufacture and Agriculture. See 
Agriculture and Manufacture 
Marginalism, defects of, 119 
Market, economic, xi, 3 
Market price, and bargaining, 204, 
205 ; economic application of, 204, 
205; process of reaching a, 201, 
204, 205; unfairness of, 205, 206 
Markets, as social organisations, 432- 
434; free, 204, 205; place of, in 
economic system, 201; relation of, 
to costs, 206, 207 

Marshall, Alfred, viii, x, 193, 234, 
304, 305; quoted, 30, 101, 102 
Marx, vii, 3, 192 

Marxism, viii; exaggeration of, 193 
Mass-production. See Production 
Maurice, F. D., vii, 7 
Menger, 306 

Mental processes, standardisation of, 
318, 319 

Metropolitan Gas Company, 386 
Metropolitan Water Board in 
London, 386 

Migration, as maintaining equilib¬ 
rium of population, 368-370; dif¬ 
ference between regular and sud¬ 
den, 369, 370; economic aspect of, 
370; to city, 261, 262 
Milieu, economic, vi 
Mill, J. S., 5, 16, 86, 99, 100-103, 109, 
120, 294 (note), 332, 338; quoted, 
302 

Mind, assimilation of, 63; commu¬ 
nity, 28 (note); dependence of body 
on, 47; excessive culture of, 62, 
63; group, viii; individual, 28 
(note); relation of, to organism, 18- 
21; relation of body to, xxi, 15, 21, 
22 ; standardisation of, 49, 318, 319. 
See also Group-mind 
Mir, Russian, 142 

Monetary control, debatable issues 
of, 414 

Monetary system, need for sound, 414 
Money, iii; and wages, 410; ap¬ 
peal of, 407-410; as an incentive, 


253, 254, 269 ; as measuring rod of 
satisfactions, 109-111, 121, 126, 
129, 349 ; dishonest, 419, 420, 426 ; 
economic aspects of, 407-430; 
international control of, 427-430; 
loss of prestige of, 412; national 
control of, 426; psychology of, 
407-414 

Monopoly, examples of, 201, 202; 
power of, 202 

Moral struggle, acuteness of, 399 
Morris, William, viii, 7, 208, 257, 327 
Mozart, xxii 
Munera Pulveris, vii 

National harmony, 115-120; doubts 
about, 117, 118, 120; defects in, 
119, 120 

National Industrial Council, forma¬ 
tion of, 388 (note) 

National selections, of standards of 
life, 328 

National Wage Board, 173 
Nationalism, xxiii-xxv; defence of, 
395; in Australia, 395; perils of, 
xxvi-xxviii, 396, 397; power of, 
405; selfishness of, 396 
Needs, definition of, 232 
Needs economy, distribution of 
wealth according to, 434-436, 438, 
439 ; explanation of, xvi, 220-223, 
228-240; violation of, 230; work¬ 
ers’ attitudes towards, 268 
Newman, Professor F. W., vii 
Nisus, 15 

Occupations. See Activities 
Open Conspiracy , The, 337 
Oligarchy, objections to, 186, 187 
Olivier, Sydney, ix 
Optimum density, and income, 349, 
350, 352; criterion of, 346, 347; 
difficulties of, 450-452; economic 
considerations of, 351-359; Law 
of Diminishing Returns in, 347- 
350 ; qualitative significance of, 341 
Optimum population, 340-371; causes 
of variation of, 343; definition 
of, 345-347 

Organism, as a philosophical con¬ 
cept, 133, 134; psycho-physical, 
16, 17; relations of, to social prob¬ 
lems, 133-135 ; social, 24, 25 



486 


INDEX 


‘Ought,’ in economic conduct, 125, 
126 

Owen, Robert, 5, 376 
Ownership, of private land, xii, xiii; 
severance of responsibility from, 
249, 250 

Patten, S. N., 306, 308; quoted, 312, 
313 

Payments. See Remuneration 
Peace, and imperialism, 401; and 
economics, 401; impossibility of, 
393 

Pecuniary rewards, necessity of, 253, 
254. See also Remuneration 
Perry, Professor, quoted, 26, 61, 62 
Personality, and bargaining, 213; 
and labour, 209, 210; and stan¬ 
dardisation, 64, 65, 67, 68; and 
the community, 29, 77, 78, 167, 
168; desirable, 353, 354; develop¬ 
ment of, 19; relation of, to asso¬ 
ciations, 33, 34 ; reliability of, 53 ; 
singleness of, 28 (note) 

Petty, 92 
Physiocrats, 96 

Pigou, 305 (note), 103, 126-128; 
quoted, 102 

‘Place, Work, Family’, 79, 80 
Plato, 12, 87; quoted, 12 (note) 

Play, physical and intellectual, 19, 20 
Political Economy, vii; and ethics, 
126, 127; as a separate science, 
130-132; criticism of, 67; relation 
of, to capitalism, 6, 7; relation of, 
to sociology, 130-133; rise of, 5, 6 
Politics and business, 377-379 
Population, and the family, 340; and 
Law of Diminishing Returns, 345, 
346; distribution of, 341; eco¬ 
nomic and humanist treatment of, 
456 ; equilibrium of, 368, 369-371; 
in backward countries, 354-356; 
national control of, 340, 341; prob¬ 
lem of, 361-368; rate of growth of, 
344-346; regulation of, 340, 341, 
351-359,450-454. See also Optimum 
Population and Optimum Density 
Population Question, xxii 
Poverty, as a social disease, vii, xi, xii 
Price-fixing, xi, 201, 205 
Price-level, the, decline of, 414-417; 
economic system’s check on, 417; 


fluctuations in, 412, 413, 421; 
rising, 416, 417, 425; stabilisation 
of, 289 (note), 414-419, 426-430 
Principles, 101 

Principles of Economics, x, 107 (note) 
Private Property. See Property 
Production, and consumption, 231, 
273, 278, 305, 306, 316, 317, 448, 
449; distribution of, 272, 273; 
enlargement of, 448, 449; mass, 
323; operation of, for benefit of 
mankind, 404; routine, 322, 323, 
325; standardised, 316-318, 325, 
326 

Professional activities. See Activities 
Profits, xii, as incentives, 225-227; 
excessive, 193-195, 437-439; fluc¬ 
tuations of, 179, 180; unearned, 
xiv, xv 

Profiteering, defence of, 294 (note) 
Progress and Poverty, ix 
Progress, social, xxii 
Prohibition, and the family budget, 
337, 338 

Property, private, acquisition of 
modern, 153,154; as a public trust, 
156, 157; as capital, 146-149; as 
power, 148, 149; as prestige, 149, 
150; communal control of, 165, 
166; criticism of defence of, 156- 
164 ; dangers of maldistribution of, 
161-164; defence of maldistribu¬ 
tion of, 154-159; depersonalisation 
of, 145-147, 152; in primitive 
society, 141-143; necessity of, 
236, 237; of a Vedda, 142 ; origin 
and use of, 143, 155 ; relation of, to 
personality, 143-145, 149; taxa¬ 
tion of, 152, 153 
Psychic Income. See Income 
Public administration. See Public 
Ownership 

Public control, economic, 385, 386; 
types of business suited for, 242, 
243 

Public ownership, 385, 386 
Purchasing power, 288, 289 

Quality vs. Quantity, 16 
Quantity. See Quality 
Quasi-rents, conception of, xviii, xix; 
meaning of, 193, 194. See also 
Rents 




INDEX 


487 


Quesnay, economic classification of,97 

Race suicide, 329 
Racial valuations. See Values 
Reason, 17, 18 
Reasoning process, 18, 19 
Regulation, government. See Gov¬ 
ernment regulation 

Remuneration, according to needs 
economy, 436-441; according to 
service, 228, 229 ; as economic fac¬ 
tor, xiv; as factor in production, 
xi; as surplus, 191,192; basis for, 
232; excessive, 270; extra, 435, 
438, 439 ; for scarcity values, 435, 
436 ; scarcity values of, 435 ; three 
categories of, 230 ; to business men, 
254; to workers, 209, 210, 269, 
434, 435, 439, 440 
Rents, quasi, 193-195; scarcity, 191 
(note), 436, 437; specific, 191 
Revolutionary doctrines, failure of 
economic, 172, 173 
Ricardo, 99, 100, 102, 105, 117 
Rich, the newly, 339 
Riches, and culture, 157-161; de¬ 
fence of stewardship of, 157-162. 
See also Wealth 

Robbins, Lionel, 346, 347; quoted, 
128, 129 

Robertson, D. H., quoted, 421 
Rosscher and Knies, school of, 132, 
133 

Rousseau, 96 

Routine-production. See Production 
Routine-work. See Labour 
Ruskin, iv, vii, 7, 155, 260, 340, 376, 
441, 454 

St. Clement, quoted, 155 
St. Simon, 220 
Salvation Army, the, vii 
Satisfactions and dissatisfactions, 
economic, 328; in economics, 103- 
111 

Saving, and bank money, 421, 422; 
for investment, 412; meaning of, 
277, 278; present method of, 278, 
279 

Savings, adjustment of, 288-290, 
296 ; and distribution, 294-299 ; 
and interest, 290-293 ; and invest¬ 
ments, 297-299; corporate, 278, 
279; individual, 279, 280, 285, 


286; monetary, 280, 281; real, 
283-285 

Saving process, as a communal activ¬ 
ity, 299, 300; defects of, 285-289 ; 
explanation of, 283, 284; in dis¬ 
tribution, 293-299 
Schaffle, 25 

Science, as economic deliverer, 447 
Security, and adventure, 68; eco¬ 
nomic reconstruction in, 234, 235 
Selection, natural. See Natural Se¬ 
lection 

Self-defence, and economic interests, 
391; limits of, 390, 391 
Self-determination, economic, 395, 
396 

Self-interests, harmony of, 98, 99; 

in economic science, 105, 106 
Selfishness, modification of, 237, 238 
Seligman, Dr., 142 
Senior, 100 

Shareholders, safeguarding of, 383; 

voting power of, 383 (note) 

Shaw, G. B., ix, 232, 233; quoted, 
381 (note) 

Sherman Act, 386 
Sidgwick, Professor, quoted, 237 
Slum problem, vi; origin of, x 
Smith, Adam, 4, 91, 100, 115, 116, 
156, 168, 185, 303, 304; economic 
contribution of, 98; quoted, 301 
Smuts, General, 14 
Social control, 339, 443, 444 
Social-Democratic Federation, viii, 
xii 

Social economic policy, failure of, 
174-178 

Social institutions, economic deter¬ 
mination of, 78 
Social mind, 26-28, 32 
Social Psychology (Wallas), quoted, 
18 

Socialism, vii; abstract desirability 
of, 218, 219 ; and capitalism, 277; 
and liberty, 218, 219 ; beginning of, 
xii, xiii; Christian, ix; definition 
of, 218; difference between indi¬ 
vidualism and, 251; fallacy of, 
381 (note); in relation to politics, 
ix; Shaw’s conception of, 381 
(note); state, 385. See also Com¬ 
munism 

Socialistic League, the, viii 




488 


INDEX 


Society, and communism, 228, 229; 
and the individual, 319, 320, 332, 
333 ; and welfare, 229, 230 ; as an 
entity, 30; as an organism, iii; 
definition of Functional, 228; 
moral responsibility of, 113; utili¬ 
tarian conception of, 117 
Sociology, relation of, to Political 
Economy, 130-133 
Soviet Russia, 181 (note) 

Spencer, Herbert, 25 
Spending and saving, adjustment of, 
296 

Stabilisation, of price level, 289 
(note), 414-419, 426-430 
Stamp, Sir J., 294 (note) 

Standard of living, a, xvii; regula¬ 
tion of, 329, 333, 334 
Standardisation, and machinery, 83, 
84; and personality, 64, 65, 67, 
68 ; faults of, 323, 324; in America, 
64 (note), 324, 325; material, 49; 
of civilisation 64, 65; of consump¬ 
tion, 320, 321, 323, 326 ; of human 
nature, 64, 65; of mental processes, 
318, 319; of production, 316-318, 
325, 326; resistance to, 324, 325 
Standards of welfare, 45-69 ; general 
and personal, 65, 66; imposition of, 
59, 60. See also Welfare 
State, the, 9; and money, 424; and 
trade associations, 388, 389; as an 
association, 39, 40 ; as an economic 
government, 375—385. See also 
Economic Government 
State-control, of smaller industries, 
386, 387; means of achieving 
efficient, 387-389; reason for in¬ 
efficiency of, 387-389. See also 
Public Control and Social Control 
States of consciousness, as welfare, 
106, 108 

Steward, Sir James, 92 
Strike of 1889, ix 
Success, economic, 365, 366 
Supply and demand, xi; and bar¬ 
gaining, 205, 206; equality of, 
204, 205; interplay of, 432, 433 
Surplus, xiv; and costs, xv, xviii, xix, 
190-193; apportionment of, 177- 
179, 190, 191, 199; as element of 
discord, 200; as rents, 191, 192; 
as result of bargaining, 212; defi¬ 


nition of, 176, 177 ; functional dis¬ 
tribution of, 229; functions of, 
196-200 ; inequality of distribution 
of, 314-316 ; Marxian definition of, 
192, 193; measurement of, xviii; 
nature of, 195, 196; productive 
consumption of, 314-316; social 
control of, 443, 444; two categories 
of, 436, 437; unearned, 293-295 
Swiss Cooperative Societies, 272 

Taussig, quoted, 102 
Tawney, R. H., 87 ; quoted, 228, 229, 
276 

Taxation 152, 153 
Taxes, 330, 331 
Temptation, definition of, 57 
Thames Conservatory Board, 386 
Thrift, meaning of, 298, 299. See 
also Saving 

Time element, in creation of capital, 
284 

Tolstoy, 7 

Town and Country. See Country 
and City 

Towns, factory, 8 
Toynbee Hall, vii 
Trade and Wage Boards, 173 
Trade Boards, 172 
Trade Boards Acts, 389 
Trades, sheltered and unsheltered, 
179, 180; as social organisations, 
432, 433 

Trades Union Congress, 388 (note) 
‘True,’ the, in life, 12, 13 
Tugwell, R. L., quoted, 317 

Underselling, in business, 211 
Unity, national, 32 
Unseen Hand, The. See Invisible 
Hand 

Unto This Last, vii 

Usury, 275, 276 ; denunciation of, 90 
Utilitarianism, 5, 16 
Utilitarians, the, 99, 109, 117 
Utilities and Costs. See Costs and 
Utilities 

Utility, iv; as basis of value, 103; 
two sources of, 327 

Values, agreement about, 58, 59; 
and purposive behavior, 15, 16; 
as conscious satisfactions, 15, 16; 




INDEX 


489 


comparison of, 71-74; conception 
of Hebraic, 11, 12; cost theory 
of, ix, x, 303; danger of higher, 
61-63; definition of, 11; differ¬ 
ence between business and welfare, 
253 ; economic, iii, iv, 112; ethical, 
iii, 11, 12, 112; final utility theory 
of, 303 ; grouping of, 70-72 ; hier¬ 
archy of, 70-74, 452 ; human, xviii, 
xxvii, 36, 271, 328, 356-358, 364, 
365 ; in economics, 86 ; individual, 
29 ; intellectual, xxi; interrelation 
of, 70 ; likeness in, 63 ; lower and 
higher, 49-51, 58, 62, 72, 73; 
monetary, iii, iv, xxvii; of person¬ 
ality, 353, 354 ; objectivity of, 58 ; 
organic, 13, 14 ; physical, 48; racial, 
452; regulation of, 46; scarcity, 
435, 436 ; social determination of, 
xi, 43, 152, 183, 168, 175, 178, 434; 
standard of, 16, 17, 22; surplus, 
xii; variations of, 14, 15, 53 
Veblen, Thornton, 20, 81, 287; 

quoted, 82 

Vedda, property of a, 142 
‘Voice’ in business, demand for, 445, 
446; workers’ claims for, 264-267 

Wage-bargain, considerations affect¬ 
ing, 209, 210 

Wage fund, doctrine of, 294 
Wage rate, a common, 173 
Wages, adjustment of, 173-184; and 
money, 410 ; minimum, 383 
Walker, F. A., xiii, 100, 101; quoted, 
303, 304 

Wallace, A. R., viii 
Wallace, Wm. Kay, 377, 378 
Wallas, Graham, ix, 18 
Wants and satisfactions, regulation 
of, 46 

War, and inflated money, 420; and 
investments, 412, 413; economic 
causes of, 392; influence of, on 
money, 412, 413; legitimate 

sources of, 393 

War-communism, moral lesson of, 
404, 405 

Waste, in economic system, 217, 218 
Wealth, iv; acquisition in, 112, 113; 
Adam Smith’s definition of, 100; 


and international money control, 
429, 430; as conscious satisfac¬ 
tions, 126-128; as a social product, 
xi, 432-434; as welfare, 127, 128; 
distribution of, 230, 426, 428, 429, 
434, 435 ; generalised, 433; Mal- 
thus’s definition of, 100-102 ; moral 
value of, 113, 114; relation of, to 
welfare, 340 ; utilitarian definition 
of, 100 

Wealth of Nations, The, 4, 91, 98, 99 
Webb, Sydney, ix; quoted, 380, 381 
Welfare, and Functional Society, 229, 
230; and international money con¬ 
trol, 429, 430 ; as economic states 
of consciousness, 106, 108; bodily 
contributions to, 45; conflict of, 
with economic system, 271; con¬ 
sumer’s satisfactions through, 305; 
criterion for, 46—48, 73 ; desired 
and desirable, xix, xx; economic, 
102-105; failure of economics to 
contribute to, 337; human, 104, 
105, 329, 330; material, 102, 103; 
meaning of, 10-22; organic, xv; 
organic test for, xxi-xxiv; personal, 
21; relation of, to individual, xx- 
xxii; relation of, to wealth, 340 
Wells, H. G., 377, 393 
Whateley, 100 
Whitley Committees, 172 
Windelbrand, 13 

Woman, emancipation of, 342, 343 
Work. See Labour 
Work-day, choice between short and 
varied, 258, 259; shorter, 271, 272 
Workers, as bargainers, 207, 208, 211; 
attitude of, towards capitalism, 
275, 276; attitude of, towards 
money, 410; attitude of, towards 
work, 225-227, 257, 258; claims 
of, 256, 264-267 ; diversity among, 
257, 380; new attitude of, 255, 
256 ; relation of, to machine, 260 ; 
remuneration of, 434, 435 
Working hours, 325 
World Population Congress, 368 

Young, 306 

Zimmern, xxv 








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